Income Tax Appellate Tribunal - Mumbai
Mogra Builders And Developers P.Ltd, ... vs Acit 6(3), Mumbai on 26 July, 2017
आयकर अपीलीय अिधकरण, अिधकरण मुंबई " एफ" खंडपीठ Income-tax Appellate Tribunal -"F"Bench Mumbai सव ी राजे ,ले लेखा सद य एवं, राम लाल नेगी, ी याियक सद य Before S/Shri Rajendra,Accountant Member and Ram Lal Negi,Judicial Member आयकर अपील सं./I.T.A./5220/Mum/2010, िनधा रण वष /Assessment Year: 2006-07 The ACIT-Cir.-6(3) M/s. Mogra Builders & Developers P.Ltd.
Room No.522, 5th floor, 16, Anupam Industrial Estate
Aayakar Bhavan, M.K. Road Vs. Opp. P&T Colony, LBS Marg
Mumbai-400 020. Mulund (W),Mumbai-400 080.
PAN:AACCM 8311 K
(अपीलाथ /Appellant) ( यथ / Respondent)
आयकर अपील सं./I.T.A./5309/Mum/2010, िनधा रण वष /Assessment Year: 2006-07 आयकर अपील सं./I.T.A./1996/Mum/2013, िनधा रण वष /Assessment Year: 2009-10 M/s. Mogra Builders & Developers P.Ltd. The ACIT-Cir.-6(3) Vs. Mumbai-400 080. Mumbai-400 020.
(अपीलाथ /Appellant) ( यथ / Respondent)
Revenue by: Shri B.S. Bist
Assessee by: Shri Dharmesh Shah
सुनवाई क तारीख / Date of Hearing: 01.05.2017
घोषणा क तारीख / Date of Pronouncement:26.07.2017
आयकर अिधिनयम,1961
अिधिनयम क धारा 254(1)के के अ
तग त आदे श
Order u/s.254(1)of the Income-tax Act,1961(Act)
लेखा सद
य राजे
के अनुसार PER RAJENDRA, AM-
Challenging the orders,dated 21.01.2009 and 29.01.2013,of the CIT(A)-12Mumbai,the Assessee and the Assessing Officer(AO)have filed the appeals,as mentioned above.Assessee- company is engaged in construction business.Details of filing of returns of income returned incomes,assessed incomes, etc, can be summarised as under :-
A.Y. ROI filed on Returned Income Assessment dt. Assessed Income 2006-07 30/11/2006 Nil 29/12/2008 Rs.4,68,27,960/-
2009-10 13/10/2010 Rs.60,710/- 30/12/2011 Rs.2,00,60,710/-
2.The assessee had filed additional grounds as well as additional evidences for the AY.2009-
10.During the course of hearing before us,the Authorised Representative(AR)stated that additional Ground of appeal raised by the assessee would go to the root of the matter,that all the facts were available on record,that it dealt with the details of expenses,that the assessee had deducted tax at source in respect of certain expenses.
With regard to the additional evidences,he stated that the issue in dispute was allowability of credit of income declared during the course of survey carried out during the AY.2006-07 towards sale of unutilised FSI and TDR in AY.2009-10,that it had suo-motu claimed disallow
-ance of Rs.52.95 lakhs u/s.40(a)(ia) of the Act on account of non- payment of TDS, that tax was deducted and paid in AY.2009-10,that the assessee wants to submit ledger account of expenses and the challans evidencing payment of TDS,that the additional evidences were not 5309&5220/M/10(06-07) 1996/M/13(09-10) produced before the AO during the assessment proceeding for the AY. 2009-10.He relied upon the case of Prabhavati S. Shah (231ITR1).The Departmental Representative(DR) opposed the additional ground as well as additional evidences.
2.1.We have gone through the applications made by assessee for admitting additional evidence.We find evidences would help the Tribunal to adjudicate the issue.Though the details were made available to the AO in the earlier year, but were not produced for the year under appeal.Therefore, we are admitting the additional evidences as per the provision of Rule 29 of the ITAT Rules,1963. The additional grounds,raised by the assessee,are legal in nature and go to the root of the issue before us.Therefore, same are being admitted.
ITA/5220/Mum/2010 -AY.,2006-07:
3.First Ground of appeal,raised by AO is about accepting the additional evidences in violation of Rule 46A of the Income tax Rules(Rules).Ground of appeal No.2 and 5 are also related with first ground,to some extent.
Brief Facts:
3.1.On 14/9/2007,a survey action was carried out at the business premises of the assessee located at Pune,Dadar and Mulund.It was found that the assessee was constructing a project namely,Eden Park,at Pune,that the construction work was over in all respects and that flats were handed over to the purchasers, that it was shown as incomplete project in the books of accounts.Statements of Director of the company,Bipin B. Shah,were recorded wherein he stated that possession of most of the flats had been given and that certain permissions were to be obtained for the project.He agreed to treat the project as completed and offered the income of Rs. 2 crores to tax.According to him,total cost of the project amounted to Rs.9.52 crores.
Total sale proceeds received were shown at Rs.11.59 crores.The Director further stated that return of income would be revised and tax would be paid accordingly.In the computation of income it offered an income of Rs.1.47 crores as additional income to cover any error or omission with regard to Eden Park Project.The AO accepted the offer made by the director of the company.
During the assessment proceedings,he further found that Rs.94.69 lakhs and Rs.1.89 crores were shown as outstanding expenses for the AY.s 2007-08 and 2008-09.He observed that the project was complete,that there was no necessity for incurring any further expenditure, that the director had surrendered Rs.2.00 crores after taking into consideration the amount incurred on various office expenses,that the expenses included an amount of Rs.1.09 crores on account of supervisory charges paid to one Sukhwani Chawla(SC)in the AY.2008-09,that 2 5309&5220/M/10(06-07) 1996/M/13(09-10) the expenditure was not allowable,that the project was completed in the AY.2006-07,that assessee had not deducted tax at source for the purchases,that expenditure was disallowable u/s.40(a)(ia).Finally,the provisions for outstanding expenses(Rs.94,69,354+ Rs.1,89,71,445) were disallowed and added to the income of the assessee.
4.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was stated that amount of Rs.1.47 crores,in addition to Rs.52.95 lakhs disallowed u/s. 40(a)(ia),was offered as income to cover any omission/ error or any addition to be made during the assessment proceedings,that the amount had not been adjusted against the additions made in the assessment,that the assessee had suffered a loss of Rs.16.12 lakhs in the project,that the AO had disallowed the entire outstanding expenses while at the same time had taxed the income receivable reflected in the balance sheet.After considering the assessment order and submission of the assessee,the FAA held that on the date of survey the assessee had already filed the return of income for AY.2006-07 in which expenses on the project (approx. Rs.94 lakhs)had been included in the WIP, that the project was completed only in the AY.2008-09,when the entire income and the expenditure was booked.He further observed that the assessee had agreed with the view taken by the AO, that the project should be treated as completed in the AY.2006-07,that it gave a broad estimate of receipt/expenses,that disallowance was primarily of outstanding expenses,that during the assessment proceedings the assessee had filed a revised P&L account in which certain figures under the head sales, balance outstanding and other receipt were shown,that the cost of construction during the year was Rs.9.84 lakhs,as per the balance sheet, that the outstanding expenses for AY.2007-08 consisted of Rs.1.69 crores consisting of purchase, other direct expenses and payments due-to contractors were of Rs.19.67 lakhs,that the assessee had treated the project completed only in the AY.2008-09,that the disputed amounts had been debited to WIP account in AY.s 2006-07 and 2007-08,that it had accepted the department's value,that the total value of WIP had to be taken into account as the cost of construction in the AY.2006-07,that the cost shown were debited in the WIP in the subseque
-nt two years,that all such expenses would also have to be included in the working of the resulting profit from the project.He further observed that even if the view of the AO about completion of the project in AY.2006-07 was accepted the total profit from project should not exceed Rs.2 crores which was declared by the assessee and was accepted by the Department, that the estimated profit could be altered only if there was sufficient evidence contrary to the assertion made by the assessee,that the AO had not brought any evidence on record that the expenditure was bogus or not genuine, that the AO had disallowed the expenditure only on 3 5309&5220/M/10(06-07) 1996/M/13(09-10) the ground that project was complete earlier, that the disallowance could be made u/s.69 and not u/s. 37 of the Act,that the AO had not rejected the books of account of the assessee,that its income was estimated,that it had declared the income in the return not as profit from project but against any addition to his income made in assessment on the basis of survey,that the disallowance of outstanding expenses would fall in that category,that the amount of disallowed expenses should be adjusted against Rs. 1.47 crores.The FAA gave details of outstanding expenses for the AY.s.2006-07 and 2007-08 and observed that the construction expenses for AY.2006-07 included electrical fittings, plumbing, payment to contractors,the administrative expenses included interest paid and compensation to current associates,that in the AY.2007-08 construction expenses included Rs.1.29 crores to SC, that the assessee had claimed that it had entered into an agreement with SC,that as per the agreement he was entitled to get space in flats of approx. 43,430 sq.ft @650 per sq.ft., that the flats would be sold by the assessee,that the difference between the sale price and agreed price had to be the share of the assessee,that the amount of sale consideration was credited to P&L A/c. of the assessee,that payment to assessee was debited in AY.2007-08,that in the earlier years same was shown as advance in the account of SC,that the account was squared off in AY.2007-
08.As per the FAA the assessee had submitted the statements of accounts and copies of returns of SC for AY.s2004-05 and 2005-06 wherein his share in the flats sold was declared. It also furnished details of flats sold on behalf of SC, name of purchasers areas of flats and profit shares with SC.He found that Rs.1.09 crores was the net amount that was paid to assessee.He further observed that entire sale proceeds were deposited in a bank account under the control of the assessee,that in the books of assessee (year ending on 31/3/06)profit from investment in the assessee's construction activity was shown as Rs.72.59 lakhs(net profit),that in the return of income filed by assessee profit of Rs.72,76,642/- was declared,that fact of obtaining finance from assessee for share in the profit was evident from documents above,that the payment to assessee was an expenditure on the project.
After taking into consideration payment made by assessee,the FAA calculated outstanding expenses for AY.s 2006-07 and 2007-08.It was claimed before FAA that all the expense shown outstanding were not necessarily incurred in AY.s.2006-07 and 2007-08, that certain expenditure were incurred prior to that period,that same were debited to the books when projects were almost complete,that assessee had deducted tax at source before making the payment,that in the cases where the tax was not deducted at source the expenditure was offered to tax as per provisions of Section 40(a)(ia).He found that assessee had made disallowance of expenses of Rs.52,95,145/- in AY.2007-08.Considering the above facts,he 4 5309&5220/M/10(06-07) 1996/M/13(09-10) held that outstanding expenses should be regarded as genuine business expenses,that same were justifiably reduced in arriving at profit from project,that the assessee had proposed to reduce these expenses from final profit in AY.2008-09,that the profit of the project was computed in AY.2006-07.
He further found that outstanding expenditure contained certain expenses which could not be allowed as cost of construction, that these expenses included routine administrative day to day expenses, that they had to be allowed as deduction only in the year of incurring i.e. AY.s. 2006-07 or 2007-08, that same could not be adjusted against the project that was completed prior to the above years.Finally,he upheld the disallowance to that extent.He further observed that the assessee had arrived at an estimate profit of Rs.2 crores from the project,that it had filed a return of income of Rs.2 crores,that it included disallowance u/s.40(a)(ia) of Rs.52 lakhs,that it was a legal disallowance, that was not part of the profit derived from the project, that the profit derived from the project had to be assessed at Rs.2 crores over and above expenditure u/s.40(a)(ia).
5.Before us,the Departmental Representative(DR)argued that SC was to be paid supervision charges only,that he was not to be given difference in sale value as claimed by the assessee, that assessee had constructed 138 flats, that 43 flats were sold to SC,that 30 flats were purchased by one other person and remaining other 65 flats were sold by the assessee,that FAA had not given any clear finding that for what purposes the expenses were incurred,that he had not explained that as on 31/3/2006 which portion of the project was incomplete,that the assessee had made disclosure of Rs.2 crores, that the FAA had admitted that additional evidence without affording an opportunity to the assessee to examine them. The Authorised Representative(AR) argued that the assessee had incurred the expenses in the subsequent years,that the FAA had given finding of facts that expenses were related with completion of the project, that he had not allowed the administrative expenses.He relied upon the case of Triveni Engineering Industries Ltd. (336ITR374), of the Hon'ble Delhi High Court.
6.We have heard the rival submissions and perused the material before us.We find that an action u/s. 133A was carried out at the business premises of the assessee at Mumbai and Pune,that it had completed a residential project in Pune, that it had business transactions with SC,that it had entered into agreement with it for purchase of 63 flats,that during the appellate proceedings,the FAA had admitted certain documents which were not made available to AO during the assessment proceedings, that based on those documents the FAA had given relief 5 5309&5220/M/10(06-07) 1996/M/13(09-10) to the assessee,that there was dispute about incurring of expenditure in the subsequent years and the allowability of the same.
We are of the opinion that the FAA should have decided the appeal after providing a copy of the documents,to the AO,that were produced before him for the first time.He should have called for a remand report from the AO. From his order it is clear that the documents of SC were not admitted by invoking the provisions of clause 4 of Rule 46A of the Income-Tax Rules,1962.
6.1.It is found that in letter dtd.19/11/2007 (Pg.9) of the PB the Director of the assessee- company had stated that there was no suppression of income or inflation of expenses,that all the income/expenses were genuinely recorded in the books of account and were verifiable, that in that statement it was also explained that the declaration was to cover any error or to cover any future income toward loading of TDR or selling of balance FSI/TDR. At pg.11 of the PB similar assertion has been made in the computation of income.In our opinion,both these papers have to be considered while deciding the issue in right perspective. It is a fact that amounts were due to SC and documentary evidence were made available to FAA.We hold that without considering the same the taxable income of the assessee cannot be deter - mined.It is also a fact that SC had also shown the income arising out of sale of flats sold by the assessee on his behalf.Secondly,if the income has to be assessed then expenditure related to same transaction will have to be allowed.This aspect was not looked into by the AO.The assessee was following a particular method of accounting for the project.Income earned from the project and expenditure incurred for the project for various years have to be taken into consideration before arriving at the final conclusion.The assessee had claimed that it had suffered a loss in the project.It is found that the AO has not offered any comment with regard to the claim of loss.Thus,there are many an aspects of the assessment that have not been dealt with or have not been adjudicated properly.Therefore,we are of the opinion that matter needs further investigation and verifi cation.Before us,representatives of both the sides also agreed that matter could be sent back to the AO.So,in the interest of justice,we are remitting back the issue to the file of the AO for fresh adjudication.He is directed to consider the additional evidence filed before us before deciding the taxability of the assessee.He would afford a reasonable opportunity of hearing to the assesse.Gr.s No.1,2 and 5 raised by the AO are decided in his favour,in part.
Additional ground of appeal,filed by the assessee,also stands partly allowed.The AO,as directed earlier,would hear the matter afresh.
ITA/5309/Mum/2010 -AY.,2006-07:
65309&5220/M/10(06-07) 1996/M/13(09-10)
7.The effective Ground of appeal raised by the assessee for the year under appeal is about declaration of Rs.2 crores as income.
8.Before us,the AR argued that the FAA should not have taken the disclosure at Rs.2 crores, that the disclosure was about sale of TDR, that same was to accrue in future.He referred to pg-9 & 11 of the PB.The DR supported the order of the FAA.
9.We have heard the rival submissions and perused the material on record.As stated earlier, the assessee had made the disclosure about future sale of TDR/FSI.The AO and the FAA has not given a clear cut finding about taxability of the amount arising out of the sale of TDR etc. It appears that the statements made during survey and the submissions made later on were not considered together.We direct the AO to deliberate upon the issue again and decide the year of taxability after affording a reasonable opportunity of hearing to the assessee.
10.Next ground of appeal is also about disclosure.The FAA had held that the disclosure of Rs.2 crores was in addition to the disallowance of Rs. 53 lakhs made u/s.40(a)(ia) of the Act.
10.1.It is found that the assessee had made the disclosure to cover the errors and omission in the project completed by it.In the earlier paragraphs,we have restored back entire issue of disclosure to the file of the assessee.We feel that this issue should also be adjudicated afresh by the AO,as it is also connected with the main issue.The AO would afford a reasonable opportunity of hearing the assessee.Ground No.2,raised by the assessee,stands partly allowed.
ITA/1996/Mum/2013,AY.2009-10:
11.The assessee did not press first Ground of appeal,during the course of hearing before us.So,the same stands dismissed as not pressed.
12.With regard to Ground No.2 the AR stated that it was the same disclosure that was made by the assessee about TDR,that assessee was not given set off against the disclosure of AY.2006-0.As we have restored back the main issue to the file of the AO,so,the connected issue has also to decided after adjudicating the same.Second ground of appeal,filed by the assessee stands allowed,in part.
As a result, appeal/appeals filed by the AO and the assessee stand partly allowed.
फलतः िनधा रती अिधकारी और िनधा रती ारा दािखल क गई अपील अपील अंशतः मंजूर क जाती ह Order pronounced in the open court on 26th July, 2017.
आदेश क घोषणा खुले &यायालय म (दनांक 26 जुलाई, 2017 को क गई ।
Sd/- Sd/-
(राम लाल नेगी / Ram Lal Negi) (राजे / Rajendra)
याियक सद य / JUDICIAL MEMBER लेखा सद
य / ACCOUNTANT MEMBER
मुंबई Mumbai; (दनांक/Dated : 26.07 .2017.
Jv.Sr.PS.
7
5309&5220/M/10(06-07)
1996/M/13(09-10)
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1.Appellant /अपीलाथ* 2. Respondent /+,यथ*
3.The concerned CIT(A)/संब/ अपीलीय आयकर आयु0, 4.The concerned CIT /संब/ आयकर आयु0
5.DR "F " Bench, ITAT, Mumbai /िवभागीय +ितिनिध, खंडपीठ,आ.अ.&याया.मुंबई
6.Guard File/गाड फाईल स,यािपत +ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai.
8