Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs M/S. Virtual Builders (P) Ltd., New ... on 20 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'D': NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 1528/Del /2013
Assessment Year: 2006-07
ACIT, Virtual Builders (P) Ltd.,
Central Circle-23, M-11, Middle Circle,
vs
Room No. 359, Connaught Place,
E-2, ARA Centre, New Delhi.
Jhandewalan (PAN: AABCV8989M)
Extension,
New Delhi-110055
(Appellant) (Respondent)
ITA No. 1749/Del /2013
Assessment Year: 2006-07
Valley Iron & Steel Co. Ltd., ACIT,
New Delhi-110002 Central Circle-23,
vs New Delhi-110055
(Appellant) (Respondent)
Appellant by : Shri B.S. Rastogi, Shri Ajay Bhagwani, CA
Respondent by : Shri Amit Jain, Sr. DR
Date of Hearing : 22.11.2017
Date of Pronouncement: 20.02.2018
ORDER
PER BENCH ITA No. 1528/Del/2013 is preferred by the department against the order of the Commissioner of Income Tax(A)-XXXIII, New Delhi for assessment year ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 2006-07 whereas ITA No.1749/Del/2013 is the cross appeal by the assessee.
2. Brief facts of the case are that the assessee is engaged in the business of development, construction and marketing of real estate projects for commercial and residential use. The return of income for the year under consideration was filed on 28.11.2006 declaring nil income. There was a search and seizure action on the BPTP Group of Companies on 15.11.2007. During the course of assessment proceedings u/s 153A/153C of the Income Tax Act, 1961 (hereinafter called 'the Act') in the case of BPTP Ltd. and its group companies, it was noticed that the assessee company which was one of the group companies had purchased land in District Faridabad during the financial year 2005-06. On perusal of the details of payments made towards purchase consideration, it was further noticed that in various cases, the assessee had made only part payment of the purchase consideration at the time of execution of the sale deed and the balance consideration was paid through post dated cheques which were en-cashed after 2 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 several months from the date of sale deed. There was also some information with the department that between the intervening period i.e. the period between the date of sale deed and the date of encashment of post dated cheques, interest was paid in cash to the vendors of the land on monthly basis @1.25% per month and this cash payment of interest was not accounted for in the books of accounts. Similarly, there was some evidence gathered that the assessee company had made some additional payments against purchase of land to various land owners which were not genuine. In light of this information, the Assessing Officer was of the opinion that income had escaped assessment and, therefore, he proceeded to issue notice u/s 148 of the Act on 29.03.2010.
2.1 In response to the notice, the assessee filed its return of income for assessment year under consideration declaring loss of Rs. 7,182/-. During the course of reassessment proceedings, the assessee was asked to submit details of interest paid in cash to the vendors on the amount of post dated cheques, its 3 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 treatment in the books of accounts and the source of these payments. Further, in the case of denial of payment of interest in cash to the vendors, the assessee was asked to produce the vendors to whom the payments had been made through post dated cheques for examination. In response, the assessee did not produce the vendors and stated in its submissions that there was no incriminating document seized which indicated payment of interest to the vendors. It was also submitted that the consideration for delay in payment was already factored in the sale price agreed upon and that since the post dated cheques were duly mentioned in the sale deeds, it established that both the parties had agreed for the payment through post dated cheques. However, the Assessing Officer referred to the various seized documents and based on the same, held that the assessee had paid interest in cash to the vendors on the amount of post dated cheques @1.25% per month outside its books of accounts. He calculated the amount of such interest at Rs. 93,07,200/- and proceeded to add the same to the income of the assessee.
4 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 2.2 Further, during the course or assessment proceedings u/s 153A/153C in the case of BPTP and its group companies, it had come to the notice of the department that BPTP Ltd. and its group companies had made additional payments of more than Rs. 45.02 crores to the vendors of the land over and above the sale consideration mentioned in the sale deeds. As per the information available with the department, the assessee had claimed to have made additional payment to the tune of Rs. 2,97,23,785/-. The assessee was asked during the course of reassessment proceedings to submit the details of additional payments as aforesaid. The assessee was also asked to produce persons for examination to whom the additional payments were claimed to have been made. In response, the assessee did not produce the vendors but submitted before the Assessing Officer that the assessee had a collaboration agreement with M/s Countrywide Pvt. Ltd. under which the assessee was to acquire lands. It was submitted that under the collaboration agreement, it was agreed that M/s Countrywide Promoters Pvt. Ltd. shall reimburse to the 5 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 assessee all costs and expenses incurred by the assessee in respect of acquisition of the concerned land. It was further submitted that since the payment was often made by post dated cheques, there was a considerable escalation in price at the time of encashment of cheques and the sellers, therefore, raised the claims of compensation for delay in payment. It was also submitted that there were numerous post sale situations and the assessee, in view of commercial expediency, had to incur additional expenditure, so that a purchase already made does not get aborted. It was also submitted that the entire expenditure was reimbursed by M/s Countrywide Promoters Pvt. Ltd. in view of the collaboration agreement and, therefore, the reimbursement was not a revenue receipt. However, the Assessing Officer was not convinced with the contentions of the assessee and proceeded to hold that the additional payment had been made in clear cut violation and contravention of law and regulation for payment of stamp duty and was not, therefore, allowable as deduction. The Assessing Officer also added the amount of Rs. 6 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 2,97,23,785/- shown as additional payment by the assessee to the income of the assessee and completed the assessment at Rs. 3,90,23,800/-.
2.3 Aggrieved, the assessee preferred an appeal before the Ld. Commissioner of Income Tax (A) challenging the addition on merits. The assessee also raised a legal ground that the addition was not valid as there was no finding by the Assessing Officer that the seized material belonged to the assessee company. The Ld. Commissioner of Income Tax(A) dismissed the assessee's challenge to the validity of assessment proceedings but gave substantial relief to the assessee on merits by deletion addition of Rs. 81,02,700/- out of total addition of Rs. 93,07,200/- on account of interest on post dated cheques. The Ld. Commissioner of Income Tax(A) also deleted the addition of Rs. 2,90,73,785/- out of total addition of Rs. 2,97,23,785/- made on account of additional payment made in violation of Stamp Duty Act 1899. Now, the department is in appeal before the ITAT and is challenging the deletion by the Ld. Commissioner of Income Tax (A) whereas the assessee is in appeal 7 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 challenging the sustenance of addition by the ld. Commissioner of Income Tax (A). The assessee is also raising the legal ground that the assessment should have been made u/s 153C of the Act and not u/s 143(3)/147 of the Act.
2.4 The following grounds have been raised by the Department in ITA No. 1528/Del/2013:-
"1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 81,02,700/- out of total addition of Rs. 93,07,200/- made by the Assessing Officer on account of interest on PDCs paid out of books of account.
2. On the facts and in the circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 2,90,73,7851- out of total addition of Rs. 2,97,23,785 made by the Assessing Officer in view of the provisions of Section 37(1) of the Income Tax Act, 1961 on account of additional payment in violation of Stamp Duty Act, 1899.
3. The order of the CIT (A) is erroneous and is not tenable on facts and in law.
4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal."
2.5 The following grounds have been raised by the assessee in ITA No. 1749/Del/2013:-
"1. That on the facts and circumstances of the case and in law the CIT(A) erred in rejecting appellant's contention that assessment order 8 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 made by Assessing Officer was bad in law and void ab-initio on the ground that it ought to have been made u/s 153C of the Income Tax Act, and not, as was done u/s 143(3)/147 of the Income Tax Act.
2. That without prejudice, on the f acts and circumstances of the case and in law, the CIT(A) erred in upholding the assumption of jurisdiction u/s 147 by the Assessing Officer and in making the assessment in pursuance thereof, without dealing with appellant's objections on merits. 2.1 That the CIT(A) having given a finding that no seized material obtained from the search of BPTP Group of cases (no search having been made on the appellant ) belonged to the appellant, clearly erred in yet upholding the action u/s 147 taken in the hands of the appellant based on such seized material.
3. That on the facts and circumstances of the case and in law the CIT(A) erred in holding to quote, 'that seized documents definitely proves that interest is paid on PDC' despite- i. that the seized record on the basis of which above finding was given, even according to his own finding by the CIT(A), did not belong to the appellant and, ii. That no enquiries were made from any of the alleged recipients of the interest and none was confronted with relevant document(s).
3.1 That the finding of the CIT(A) is based on mere surmises and conjectures without proof and corroboration by independent evidence. 3.2 That without prejudice the CIT(A) erred in upholding the addition of interest for the period for which PDCs were extended.
3.3 That without prejudice the CIT(A) erred in not quantifying the addition and instead giving 9 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 ambiguous directions to compute the interest af ter six months from the date of sale.
4. That on the facts and circumstances of the case and in law the CIT (A) erred in not accepting the appellant's contention that Additional Payments having not been claimed as deduction by appellant, no disallowance could have been made in the hands of the appellant.
4.1 That without prejudice the CIT(A) erred in upholding the disallowance of Additional Payments made to the recipients who were not the owners of land and to the payment made in cash.
4.2 That without prejudice the CIT(A) erred in not himself quantifying the addition to be made. 4.3 That without prejudice the CIT(A) did not deal with the following specific grounds No.4,1 to 4.4:-
"4.1 Without prejudice, the learned Assessing Officer has erred in making an addition of Rs.2,97,23,785/- on account of additional payment instead of Rs. 6,50,000/-. 4.2 That on the facts and circumstances of the case and in law, the learned Assessing Officer has erred in wrongly treating the amount of lease money paid of Rs.2,84,73,785/- as per lease deed (lease money paid 2,75,93,750+stamp duty paid 8,80,035) as additional payment. 4.3 That on the facts and circumstances of the case and in law, the learned Assessing Officer has erred in disallowing additional payment made of Rs.6,00,000/- to Udham Singh & Others during the year ended 31.3.2007 which is already disallowed by the learned Assessing Officer during the Assessment Year 2007-08. 4.4 That the learned Assessing Officer has erred in making addition of Rs. 2,97,23,785/- on account of 10 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 payment of Additional Payments as recorded in Books of Account of appellant company as against amount of Rs.6,50,000/- paid on account of additional payment and recorded in Books of Accounts."
5. That the orders passed by the Assessing Officer and Commissioner of Income Tax (Appeals)-XXXIII, New Delhi are bad in law and void ab-initio.
6. The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or before the date of hearing of the appeal."
3. At the outset, the Ld. AR submitted that ground nos. 1, 2, 2.1, 5 and 6 of the assessee's appeal were not being pressed. Thus, these grounds are being dismissed as not being pressed. In effect, only ground no. 3 and 4 will be argued and adjudicated upon.
3.1 The Ld. AR submitted that the Assessing Officer made addition of Rs. 93,07,200/- in respect of interest on post dated cheques. In appeal, the Ld. Commissioner of Income Tax(A) directed the Assessing Officer that if it was not possible to work out the extension of post dated cheques in each case, the Assessing Officer was to re- compute the interest on post dated cheques after six months from the date of issuance of post dated cheques. It was submitted that as a result, the Assessing Officer 11 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 gave appeal effect whereby addition of Rs. 81,02,700/- was deleted and only Rs. 12,04,500/- was confirmed. Ld. AR further submitted that since there was a mistake in making addition in respect of post dated cheques, in the appeal effect order, application u/s 154 were submitted on 28.01.2011 and 17.04.2017 wherein it was submitted that the interest on post dated cheques in respect of sale deed no. 444 executed with Mr. Shri Chand had been wrongly computed w.e.f. 20.03.2005 instead of 20.03.2006 and accordingly, the period of encashment of two post dated cheques was less than six months and as a result if this rectification was allowed, the entire amount of Rs. 93,07,200/- would be deleted. It was submitted that the Assessing Officer had so far not taken any action on the rectification application moved by the assessee. With respect to the department contesting the payment of above in respect of interest on post dated cheques, Ld. AR submitted that identical issue had come up for consideration in the case of sister concern, M/s IAG Promoters and Developers Pvt. Ltd. wherein also the Ld. Commissioner of Income Tax(A) had 12 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 given similar directions and the ITAT had upheld the directions vide order dated 31.10.2014 in ITA No. 1674/Del/2013 and 1765/Del/2013 for assessment year 2008-09 by holding that there was a sound logic for such direction by the Ld. Commissioner of Income Tax(A) and the same was based on material found and seized at the time of search. Ld. AR also submitted that this order of ITAT Delhi in the case of IAG Promoters and Developers Pvt. Ltd. (supra) has been accepted by the department and, therefore, the department's ground no. 1 should be dismissed. It was also submitted that ITAT Delhi Bench had taken a similar view as that in the case of IAG Promoters and Developers Pvt. Ltd. in the cases of M/s Countrywide Promoters Pvt. Ltd. (ITA No. 6303/Del/13 and 6342/Del/2013), M/s KA Promoters and Developers Pvt. Ltd. (ITA No. 1677/Del/2013 and 1737/Del/2013) and M/s Vasundra Promoters Pvt. Ltd. (ITA No. 1527/Del/2013 & 1758/Del/2013) which were sister concerns of the assessee company. It was also submitted that if department's ground no. 1 is dismissed, then 13 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 assessee's ground no. 3, 3.1, 3.2 and 3.3 will not survive.
3.2 With respect to ground no. 4 relating to disallowance of additional payment, the Ld. AR submitted that the Assessing Officer had made disallowance of Rs. 2,97,23,785/- u/s 37(1) of the Act on the ground that these payments were in violation of the Stamp Duty Act. It was submitted by the Ld. AR that the assessee had contended before the Ld. Commissioner of Income Tax (A) that the deduction towards payment for purchase was not claimed as a deduction and hence no disallowance could be made but the Ld. Commissioner of Income Tax (A) did not accept the assessee's contention but gave direction to the Assessing Officer to quantify the disallowance to be made. It was further submitted that as per the directions after giving the appeal effect, only the balance disallowance of Rs. 65,0000/- remained. The Ld. AR submitted that since the assessee has not claimed the expenditure, the same cannot be disallowed. It was further submitted that an identical issue arose in the case of M/s Westland Developers Pvt. Ltd. in ITA No. 14 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 1752/Del/2013 for assessment year 2006-07, which was a group company, and the ITAT, vide order dated 22.08.2014, had deleted the addition. It was also submitted that the order of ITAT in M/s Westland Developers Pvt. Ltd. had been accepted by the department and, therefore, the same had become final. It was also submitted that this order of the ITAT was also followed by Coordinate Bench of ITAT in the case of sister concern of the assessee M/s Countrywide Promoters Pvt. Ltd. It was submitted that both the grounds of the assessee are allowed and the grounds raised by the department are dismissed.
4. In response, the Ld. Sr. DR read out extensively from the order of assessment and placed extensive reliance on the findings recorded therein. Ld. Sr. DR vehemently argued that the Ld. Commissioner of Income Tax (A) had given relief to the assessee without giving proper consideration to the factual matrix and the settled legal position.
5. We have heard the rival submissions and perused the material available on record. Ground nos.1, 2, 2.1. 5 15 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 and 6 of the assessee's appeal have already been dismissed as not being pressed. Ground no. 1 of the department's appeal and ground no. 3, 3.1, 3.2 and 3.3 of the assessee's appeals are interrelated. It is the contention of the Ld. AR that the issue of interest on post dated cheques stands settled by the order of ITAT in the case of Ms/ IAG Promoters & Developers Pvt. Ltd. which is a sister concern in the group of cases. Here also, the Ld. Commissioner of Income Tax (A) had given a similar direction for recalculating the interest from a date six months after the issue of post dated cheque and the ITAT had upheld these directions as there being a sound logic behind such direction. Therefore, on identical facts, respectfully following the order of ITAT in the case of M/s IAG Promoters & Developers Pvt. Ltd., we also hold that the Ld. Commissioner of Income Tax (A) has given a direction which is having a sound logic and the directions are accordingly upheld. We also find that the Ld. AR has submitted that there is an error in computing the calculation of disallowance by the Assessing Officer in giving the appeal effect. It has been 16 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 contended that the entire disallowance will be deleted as interest on post dated cheques in respect of sale deed executed with M/s Shri Chand has been wrongly computed by taking the date of computation as 22.03.2005 instead of 22.03.2006. This issue necessarily will have to be examined by the Assessing Officer. Accordingly, we restore this issue to the file of the Assessing Officer with the direction to consider the rectification application moved by the assessee in this regard and correctly compute the interest thereafter after giving proper opportunity to the assessee to present its case. Accordingly, ground nos. 3, 3.1, 3.2, 3.3 of the assessee's appeal stand allowed for statistical purposes and respectfully following ITAT's order in the case of M/s IAG Promoters and Developers Pvt. Ltd. (supra), we dismiss ground no. 1 raised by the department. 5.1 Coming to ground no. 2 of the department's appeal and ground nos. 4, 4.1, 4.2, 4.3 and 4.4 of the assessee's appeal which are related, we find that this issue is covered in favour of the assessee by the order of ITAT Delhi Bench in the case of M/s Wellworth Developers Pvt. 17 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 Ltd. in ITA no. 16754/Del/2013 and 1761/Del/2013 for assessment year 2006-07 as well as in the case of M/s Westland Developers Pvt. Ltd. (supra) along with numerous other cases. The ITAT Delhi Bench has also taken a similar view in the case of M/s Countrywide Promoters Pvt. Ltd. (supra) wherein it has been held that being bound by the decision of the Coordinate Bench, it is held that no disallowance on additional payment can be made. The Coordinate Bench further held that the Ld. Commissioner of Income Tax (A) was not justified in upholding part of the disallowance of additional payment on the ground that neither the assessee has debited additional payment in its profit and loss account nor has claimed it. Therefore, respectfully following the orders of the Coordinate Benches as aforesaid, we allow ground nos. 4, 4.1, 4.2, 4.3 and 4.4 of the assessee's appeal and dismiss ground no. 2 of the department's appeal.
6. In the result, the assessee's appeal stands partly allowed whereas the department's appeal stands dismissed.
18 ITA No. 1528/D/2013, 1749/D/2013 Assessment year 2006-07 The order is pronounced in the open court on 20.02.2018.
Sd/- Sd/-
(G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA)
PRESIDENT JUDICIAL MEMBER
Dated: 20th February, 2018
'GS'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order
ASSISTANT REGISTRAR
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