YASH REALTORS, MUMBAI v. ITO WD 24(2)(4), MUMBAI

ITA 8852/MUM/2010 | 2006-2007
Pronouncement Date: 28-10-2013 | Result: Dismissed

Appeal Details

RSA Number 885219914 RSA 2010
Assessee PAN AAAFY0472G
Bench Mumbai
Appeal Number ITA 8852/MUM/2010
Duration Of Justice 2 year(s) 10 month(s) 8 day(s)
Appellant YASH REALTORS, MUMBAI
Respondent ITO WD 24(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 28-10-2013
Date Of Final Hearing 28-10-2013
Next Hearing Date 28-10-2013
Assessment Year 2006-2007
Appeal Filed On 20-12-2010
Judgment Text
IN THE INCO ME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI VIJAY PAL RAO JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER ./I.T.A. NO. 8850/M/2010 ( AY : 200 4 - 2 00 5 ) ./I.T.A. NO. 8852/M/2010 ( AY : 2006 - 2 00 7 ) YASH REALTORS 807 TULSIANI CHAMBERS 212 NARIMAN POINT MUMBAI - 400 021. / VS. ITO - WARD 24(2)(4) 6TH FLOOR C_13 PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI 400 051. ./ PAN : AAAFY 0472 G ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI G.P. MEHTA / REVENUE BY : SHRI VIRENDRA OJHA DR / DATE OF HEARING : 28.10 .2013 / DATE OF P RONOUNCEMENT : 28 .10 .2013 / O R D E R PER D. KARUNAKARA RAO AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THESE APPEALS ARE FILED BY AGAINST THE SEPARATE ORDER S OF THE CIT (A) - 34 MUMBAI. SINCE THE IDENTICAL ISSUES ARE INVOLVED IN BOTH THE APPEALS THEREFORE FOR THE SAKE OF CONVENIENCE; THEY ARE CLUBBED HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 2. FIRSTLY WE SHALL TAKE UP ITA NO.8850/M /2010 WHICH IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A) - 34 MUMBAI DATED 25.10.2010 FOR THE ASSESSMENT YEAR 2004 - 2005 AND THE GROUNDS RAISED IN THIS APPEAL ARE AS UNDER: 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE BAD IN LAW AND BAD I N FACTS. 2. THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN HOLDING THAT THE APPELLANT COULD NOT PRODUCE ALL THE BILLS VOUCHERS ETC AND HAVE FURTHER ERRED IN DISALLOWING / ADDING RS. 1 00 000/ - TO RETURNED INCOME ON AD - HOC BASIS WITHOUT SPECIFICALLY POINTING OUT AS TO WHICH PARTICULAR EXPENDITURE WAS NOT FULLY VOUCHED. 3. THE LD CIT (A) HAS GROSSLY ERRED IN DIRECTING THE AO TO REDUCE RS. 1 00 000/ - FROM WIP ACCOUNT EVEN THOUGH COMPLETE DETAILS WERE FURNISHED IN SUPPORT OF 2 EXPENSES. THE IMPUGNED DISALLOWANCE I S WRONG AND CONTRARY TO EVIDENCE ON RECORD. 4. HAVING REGARD TO THE FACTS OF THE CASE PROVISIONS OF LAW AND JUDICIAL PROPOSITIONS THE IMPUGNED DISALLOWANCE OF RS. 1 00 000/ - IS ARBITRARY AND UNTENABLE. 3. AT THE OUTSET SHRI G.P. MEHTA LD COUNSEL FOR T HE ASSESSEE MENTIONED THAT THE ONLY ISSUE RAISED IN THE GROUNDS RELATES TO THE CONFIRMING OF ADDITION OF RS. 1 LAC ON AD - HOC BASIS FOR WANT OF COMPLETE DETAILS AND SUPPORTED EVIDENCES. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY CIT (A) C ONFIRMED THE DISALLOWANCE BY STATING THE FOLLOWING. 2. I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE LD AR OF THE APPELLANT ALONG WITH MATERIAL AVAILABLE ON RECORD. I FIND THAT THE AO HIMSELF HAS MENT IONED THAT THE EXPENSES ARE DEBITED TO WORK - IN - PROGRESS AND SINCE APPELLANT COULD NOT PRODUCE BILLS / VOUCHERS FOR ALL SUCH EXPENSES HE DISALLOWED RS. 1 00 000/ - OUT OF THESE EXPENSES. HOWEVER SINCE THESE EXPENDITURES ARE NOT CHARGED IN THE P&L ACCOUNT THE ADDITION OF RS. 1 00 000/ - TO THE DISCLOSED INCOME IS NOT JUSTIFIED. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO DELETE THIS ADDITION AND REDUCE WORK - IN - PROGRESS BY RS. 1 00 000/ - . 4. BEFORE US LD COUNSEL BROUGHT OUR ATTENTION TO THE CORRESPO NDENCE FILED BEFORE THE CIT (A) PLACED AT PAGE 22 OF THE PAPER BOOK AND MENTIONED THAT THE SAID DISALLOWANCE IS NOT CALLED CONSIDERING THE FACT THAT IT IS AN AUDITABLE CASE AND AUDITORS HAVE ISSUE D REPORT U/S 44AB OF THE INCOME TAX ACT 1961 AND THE AO HAS FAILED TO POINT OUT ANY SPECIFIC DEFECTS IN THE SAID SUPPORTIVE EVIDENCES. BRINGING OUT ATTENTION TO PAGE 3 AND 4 OF THE PAPER BOOK LD COUNSEL MENTIONED THAT THE CASH RELATED EXPENDITURE IS MINIMAL AND THEREFORE THERE IS NO NEED FOR ANY AD - HOC DISALLOW ANCES. 5. ON THE OTHER HAND LD DR STATED THAT THE EXPENSES INCURRED ON VARIOUS ACCOUNTS SUCH AS CARPENTRY CHARGES PAINTING CHARGES ELECTRIC EXPENSES MARBLE & TILE FIXING CHARGES PLUMBING CHARGES SAND & METAL CHARGES ETC INVOLVE CASH PAYMENTS ONLY. NORMALLY SUCH EXPENSES ARE SUFFER FROM THIRD PARTY VOUCHERS AND EVIDENCES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES WE FIND THAT THE DETAI LS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER / CIT (A) ARE NOT OPEN TO THIRD PARTY SCRUTINY AND THEY HAVE NOT SUSTAINABLE TO SEVERE SCRUTINY 3 OF THE REVENUE AUTHORITIES. IN OUR OPINION A SSESSEES GENERAL EXPLANATIONS ARE NOT SUSTAINABLE. THE REFORE WE ARE OF THE OPINION THAT THE DISALLOWANCE MADE BY THE AO SUSTAINED BY THE CIT (A) MAY BE RESTRICTED TO RS. 75 000/ - ON AD - HOC BASIS AND IT SHOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ./I.T.A. NO.8852/M/2010 (AY: 2006 - 2007) 8. THIS APPEAL FILED BY THE ASSESSEE ON 20.12.2010 IS AGAINST THE ORDER OF CIT (A) - 34 MUMBAI DATED 02.11.2010 FOR THE ASSESSMENT YEAR 2006 - 2007. IN THIS APPEAL ASSESSEE RAISED THE FOLLOWING GROUNDS WH ICH READ AS UNDER: 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE BAD IN LAW AND FACTS. 2. THE LD CIT (A) HAS GROSSLY ERRED IN DIRECTING THE AO TO ADD RS. 4 1 9 788/ - TO WORK - IN - PROGRESS ACCOUNT INSTEAD OF ALLOWING THE SAID EXPENSES FOR THE YEAR AS THE SAID EXPENSES WERE NOT PROJECT SPECIFIC EXPENSES. 3. THE LD CIT (A) HAS GROSSLY ERRED IN DIRECTING THE AO TO ADD RS. 2 02 987/ - TO WORK - IN - PROGRESS ACCOUNT EVEN THOUGH SAME WAS AN ALLOWABLE DEDUCTION VIDE PROVISO TO SECTION 40(A)(IA) OF THE INCOME TAX ACT 1961. 4. HAVING REGARD TO THE FACTS OF THE CASE PROVISIONS OF LAW METHOD OF ACCOUNTING REGULARLY FOLLOWED AND JUDICIAL PRONOUNCEMENTS IMPUGNED TREATMENT OF EXPENSES IS WRONG AND UNTENABLE IN LAW. 9. GROUND NO.1 & 2 PERTAINED TO DI SALLOWANCES AMOUNTI NG TO RS. 4 1 9 789/ - OUT OF EXPENDITURE LIKE BANK CHARGES OFFICE MAINTENANCE TELEPHONE EXPENSES STAFF SALARY DEPRECIATION ON THE ASSESSTS CONNECTED TO THE ASSESSEES BUSINESS. DURING THE ASSESSMENT PROCEEDINGS AO OBSERVED THAT THE ASSESSEE WHO IS EN GAGED IN THE BUSINESS OF BUILDER AND DEVELOPER HAS FOLLOWED THE PROJECT COMPLETION METHOD AND DEBITED THE EXPENSES TO WORK - IN - PROGRESS (WIP) ACCOUNT. IN THE P&L ACCOUNT NO INCOME WAS DECLARED BY THE ASSESSEE AND VARIOUS EXPENDITURES I.E. SALARY DEPREC IATION TELEPHONE ETC WERE DEBITED CLAIMING NET LOS S OF RS. 4 19 789/ - . SINCE NO BUSINESS WAS CARRIED OUT BY THE ASSESSEE AND THE EXPENSES RELATE TO TWO NEW PROJECTS THE AO MADE DISALLOWANCE AMOUNTING TO RS. 4 19 789/ - . AGGRIEVED WITH THE ABOVE DECISIO N OF THE AO ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 10. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CIT (A) PARTLY ALLOWED ASSESSEES APPEAL VIDE PARA 2.3 OF THE I MPUGNED ORDER WHICH READS AS UNDER: 2.3. I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER THE ARGUMENTS AND SUBMISSIONS OF THE LD AR OF THE APPELLANT AS WELL AS THE MATERIAL AVAILABLE ON RECORD. I FIND THAT THESE ARE THE EXPENSES TO B E TAKEN TO THE WORK - IN - PROGRESS AS EXPENSES OF THE BUSINESS TO BE CARRIED FORWARD TILL THE PROJECTS ARE COMPLETE AS APPELLANT IS FOLLOWING THE PROJECT COMPLETION METHOD . THE AO IS THEREFORE DIRECTED TO ALLOW THE EXPENSES CHARGED IN THE P& L ACCOUNT TO THE TUNE OF RS. 4 0 9 788/ - TO BE INCLUDED IN WORK - IN - PROGRESS AS HE HAS NOT FOUND ANY OF THE EXPENSES TO BE NON - GENUINE APART FROM DONATION OF RS. 10 000/ - WHICH IS OTHERWISE NOT ALLOWABLE. THESE EXPENSES IN WORK - IN - PROGRESS CAN BE CONSIDERED AT THE TIME WHEN THE PROJECTS ARE COMPLETE AND REVENUE IS RECOGNIZED . I DO NOT AGREE WITH AO THAT THE APPELLANT HAS NOT DONE ANY BUSINESS DURING THE YEAR AS HUGE ELECTRICITY CHARGES AND TELEPHONE CHARGES TO THE TUNE OF RS. 36 843/ - & RS. 87 879/ - RESPECTIVELY HAVE BE EN INCURRED BY THE APPELLANT DURING THE REGULAR COURSE OF THEIR BUSINESS . THE ALLOWANCE OF EXPENDITURE IS DEFERRED BECAUSE OF THE METHOD FOLLOWED BY THE APPELLANT ON COMPLETION OF PROJECT ONLY. THUS GROUND NO.1 & 2 ARE PARTLY ALLOWED. 10.1. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A) ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND NO.1 AND 2. 11. DURING THE PROCEEDINGS BEFORE US LD COUNSEL FOR THE ASSESSEE ARGUED THAT THE IMPUGNED EXPENDITURE SINCE PE RTAINS TO COUPLE OF PROJECTS DURING THE YEAR UNLIKE THE SINGLE PROJECT UNDERTAKEN BY THE ASSESSEE IN THE EARLIER YEARS THE EXPENSES COULD NOT BE APPO RTIONED BETWEEN THE PROJECTS T HEREFORE THE CLAIM OF THE ASSESSEE THAT THE WHOLE OF EXPENDITURE SHOULD BE ALLOWED WITHOUT ANY DISTURBANCE. 12. ON THE OTHER HAND LD DR RELIED ON THE ORDERS OF THE AO AND THE CIT (A). 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS T HE MATERIAL PLACED BEFORE US. THE ARGUMENT O F THE LD COUNSEL THAT THE IMPUGNED EXPENDITURE DURING THE YEAR PERTAINS TO TWO PROJECTS AND THE EXPENDITURE COULD NOT BE APPORTIONED BETWEEN THE PROJECTS SHOULD NOT STAND CONSIDERING THE FACT THAT THE EXPENDITURE IS ALLOCABLE BASED ON THE VARIOUS CRITERION S INCLUDING THAT OF THE ACTUALS. OTHERWISE TURNOVER RATIO PROFITS RATIO ETC SHOULD ASSIST THE ASSESSEE IN THIS REGARD. FURTHER WE NEED TO CLARIFY THAT THERE IS NO ACCOUNTING METHOD SPECIFIED BY THE ASSESSEE IN THE ACCOUNTS THAT HE IS NOT ALLOWED TO D EVIATE THE METHOD OF ACCOUNTING FROM THAT OF THE METHOD FOLLOWED IN THE 5 PRECEDING ASSE SSMENT YEAR. IT IS ON RECORD OF EARLIER AY THAT THE ASSESSEE CREDITED EVERY EXPENDITURE TO THE WIP ACCOUNT WHICH IS ONLY TO BE CLAIMED AS EXPENDITURE IN THE YEAR OF CO MPLETION OF THE RELEVANT PROJECT. ASSESSEE SHOULD NOT BE ALLOWED TO DEVIATE F ROM THIS METHOD WITHOUT THERE BEING NO SPECIFIC AND SUSTAINABLE REASON. THE TWO PROJECTS CENTRIC ARGUMENT STANDS DISMISSED. THEREFORE WE ARE O F THE OPINION THAT IN PRINCIPLE THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 14. GROUND S NO.3 & 4 RELATE TO THE DISALLOWANCE TO THE TUNE OF RS.2 02 987/ - MADE BY THE AO ON ACCOUNT OF NON - DEDUCTION OF TDS. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. DURING THE FIRST APPELLATE PR OCEEDINGS THE ASSESSEES SUBMISSIONS ARE GIVEN IN PARA 3.2 OF THE IMPUGNED ORDER WHICH READ AS UNDER: THE APPELLANT CLAIMED RS. 2 02 987/ - AS DEDUC TION FOR DISALLOWANCE MADE IN THE PRECEDING YEAR U/S 40(IA) FOR WANT OF TDS ON INTEREST PAID / PAYABLE AT RS. 2 02 987/ - . SINCE THIS IS A STATUTORILY ALLOWABLE DEDUCTION THE IMPUGNED DISALLOWANCE WITHOUT EVEN LOOKING IN TO THE CLAIM IS WHOLLY WRONG. W E ARE ENCLOSING HEREWITH A COPY OF RETURN OF INCOME FILED FOR AY 2005 - 06 SHOWING THE DISALLOWANCE OF INTEREST AND REQUEST THAT THE AO MAY PLEASE BE DIRECTED TO ALLOW THE DEDUCTION AS CLAIMED. 15. AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE C IT (A) REJECTED THE ASSESSEES APPEAL VIDE PARA 3.3 OF HIS ORDER WHICH READS AS UNDER: 3.3. I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER THE ARGUMENTS AND SUBMISSIONS OF THE LD AR OF THE APPELLANT AS WELL AS MATERIAL AVAILABLE ON RE CORD. I FIND THAT THE IMPUGNED EXPENSES ON WHICH NO TDS IS MADE CANNOT BE DISALLOWED IN THIS YEAR AS IT IS NOT CHARGED IN THE P&L ACCOUNT BUT THE APPELLANT HAD CLAIMED THAT IT SHOULD BE ALLOWED IN THIS YEAR AS PAYMENT OF TDS HAS BEEN DONE WHEREAS THE SAME AMOUNT WAS DISALLOWED IN EARLIER YEARS. IN MY OPINION THIS CLAIM HAS ALSO TO BE DIFFERED TILL THE REVENUE RECOGNIZED IN THE YEAR IN WHICH THE PROJECT IS COMPLETED. ACCORDINGLY THESE GROUNDS ARE ALSO REJECTED. THE APPELLANT IS FREE TO CLAIM THIS AMOUN T IN THE YEAR IN WHICH THE REVENUE IS RECOGNIZED ON COMPLETION OF THE PROJECT. 16. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A) ASSESSEE FILED THE PRESENT APPEAL BY RAISING THE ABOVE MENTIONED GROUND 3 AND 4. 17 . DURING THE PROCEEDINGS BEFORE US L D COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 18 . ON THE OTHER HAND LD DR RELIED ON THE ORDERS OF THE AO AND THE CIT (A). 6 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES I N GENERAL PARA 3.3 OF THE CIT (A)S ORDER IN PARTICULAR. ON PERUSAL OF THE CIT (A)S ORDER WE AGREE WITH THE CIT (A)S OPINION THAT AS THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD THE EXPENSES IN WORK - IN - PROGRESS CAN BE CONSIDERED AT THE TI ME WHEN THE PROJECTS ARE COMPLETE AND REVENUE IS RECOGNIZED. CONSIDERING THE SAME WE ARE OF THE OPINION THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY GROUNDS NO.3 & 4 RAISED BY THE ASSESSEE ARE DISMISSED. 19. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER 2 013. SD/ - SD/ - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 28.10 .2013 . . ./ OKK SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. / DR ITAT MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBA I