M/S PRATEEK ALLOYS PVT. LTD.,PANAJI vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), PANAJI

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ITA 279/PAN/2019Status: DisposedITAT Panaji29 April 2022AY 2015-1610 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s deletion of the Rs. 14 crore addition for AY 2014-15, stating no concept of 'deemed income' applied. For AY 2015-16, it was held that since the income was already offered by the assessee, it could not be taxed again. The disallowance of cash sales and business expenses were also deleted, finding the AO's findings not specific enough.

What were the facts?

The assessee company received Rs. 14 crores for services rendered under an MOU. The Assessing Officer (AO) treated this as unrecorded investment and deemed income for AY 2014-15, but the CIT(A) deleted this addition. For AY 2015-16, the assessee declared the Rs. 14 crores as income, but the AO added it back, which the CIT(A) upheld. The Revenue also appealed the deletion of cash sales addition and the assessee appealed disallowance of business expenses.

What were the issues?

Whether the Rs. 14 crore received under an MOU constitutes deemed income for AY 2014-15 and if it can be taxed again for AY 2015-16. Whether cash sales and business expenses were rightly disallowed by the AO.

Which sections of the Income-tax Act were involved?

Section 132,Section 133A,Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI

Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE

For Appellant: Shri. Shrinivas Nayak, CA &, Smt. Girija Agarwal, Director
Hearing: 04.04.2022Pronounced: 29.04.2022

Heard together (3 matters)

I.T.A. No. 75/PAN/2018
C.O. No. 13/PAN/2018
I.T.A. No. 279/PAN/2019

Read from the judgment's own cause title. This page is filed under one of them.

ORDER Per Anikesh Banerjee, JM:

The instant all three appeals were filed by the Assessee and Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals)-2, Panaji [in brevity the CIT(A)], passed u/s 250(6) of the Income Tax Act, 1961 [in brevity the Act], for Assessment Years 2014-15 and 2015-16.

2.

All three appeals have common issue. So all three appeals are taken together for sake of brevity.

3.

Here, for assessment year 2014-15 was filed by the Revenue related to disallowance of addition of Rs.14 crores and cash sale of Rs. 1,18,66,076/- by the Ld. CIT(A) and the Cross Objection (CO) was filed by the assessee bearing CO No. 13/PAN/2018 for AY 2014-15 related to sustaining disallowance of business expenditure amounting to Rs. 60,7500/-.

4.

Rs. 14 crores and disallowance of Rs.4 lacs for business expenditure which was rejected by the Ld. CIT(A).

3 & Ors Asstt. CIT v. Prateek Alloys Pvt. Ltd.

5.

Brief fact is that the assessee is a company. A search was conducted u/s 132 of the Income Tax Act, 1961, on M/s Vedarambh Properties LLP (Omkar Group). A subsequent survey proceeding u/s 133A of the Act was carried out on assessee on 03.06.2015. During the assessment year 2015-16, the assessee has entered into Memorandum of Understanding (MOU) with M/s Vedarambh Property LLP dated 16.01.2015 towards liasoning, assisting & negotiating and getting surrendered of all rights so created due to negotiations in the land consisted of clearing the tenants and organizing and ensuring vacant and peaceful possession of the property for Vedarambh Group. As a result, the assessee had received Rs.14 crores, towards the services to Vedarambh Property LLP (Omkar Group). This income has declared in its income for assessment year 2015-16. The copy of the Memorandum of Understanding (MOU) is annexed here:

“This Memorandum of Understanding-cum-Agreement is made entered into at Mumbai this 16th day of January in the year Two Thousand Fifteen;

Between

Vedarambh Properties LLP, a Limited Liability Partnership incorporated and registered under the provisions of Limited Liability Partnership Act. 2008 and having its registered office at Omkar House, Off Eastern Express Highway, opposite Sion-Chunabhatti signal, Sion (E), Mumbai- 400 002 hereinafter called “the Developer" (which expression shall unless it be repugnant to the context or meaning thereof be deemed to mean and include its successors and assigns) of the First Part;

And Prateek Alloya Private Limited PAN no. AAACP 1598D at Plot no. 108, kundaim Industrial Estate Kundaim, Panda, Punji, Goa 403115 hereinafter referred to as "the

4 & Ors Asstt. CIT v. Prateek Alloys Pvt. Ltd. Claimant" (which expression shall unless it be repugnant to the content or meaning thereof be deemed to mean and include its successors and assigne) of the Other Part;

Whereas

(a) The Developer is in the field of redevelopment of Slum and Old Buildings in the City of Mumbai and its Suburbs:

(b) The Developer is desirous of implementing Slum Rehabilitation Scheme on all that piece and parcel of land admeasuring 64219.67 square metres or thereabouts bearing C.TS No. 1 (part) of Village Ghatkopar, Taluka Kurta situated at Vikhroli Parksite, Vikhroli (West), Mumbai-400 079 alongwith all the structures standing thereon

("said Property");

(c) The Developer has accordingly taken the steps inter alia, negotiations with the Owners, Kabjedars, Imlamalik amongst others;

(d) The Claimant has approached the Developer and claimed that the Claimant has also initiated steps and entered into understanding with the Owners and/or Kabjedar in respect of land encumbered with structures/huts standing on the said property

(e) The Claimant approached the Developer and agreed to surrender and relinquish all the claims/rights as purportedly claimed by them in respect of the said property after series of corresponding/meeting and the Developer with the larger objective agreed to acquire and/or settle all such claims/rights for the consideration and on terms and conditions hereinafter appearing.”

6.

For the assessment year 2014-15, the Ld. AO made his observations as follows vide the copy of page 6 of the assessment order:

5 & Ors Asstt. CIT v. Prateek Alloys Pvt. Ltd. “From the above it is clear that the said immovable property which has been transferred/relinquished/surrendered on the date. 16.01.2015 vide MoU-cum Agreement dtd. 16.01.2015, to Vedarambh Properties LLP, Mumbai, was in "possession" of assessee before the said date but was not shown in the balance sheet of the assessee as at 31.3.2014, as it was not recorded in the books of account of the assessee. The assessee could not substantiate the date and value of said property with any kind of documentary evidence, which is necessary in property deals. Therefore, the same is treated as unrecorded investment and the value thereof is deemed to be the income of the assessee at Rs.14,00,00,000. Therefore, the same is being added back to the total income declared by the assessee.

ADD : Rs.14,00,00,000/-

7.

This particular addition was rejected by the Ld. CIT(A) as there is no concept of the “deemed to the income”. Against the order of the Ld. CIT(A) the Revenue filed an appeal before us. Observation of the ld. CIT(A) is reproduced as under:

“3.3 I have gone through the Assessment Order and the submissions made by the AR of the appellant. It is a fact that the AO does not have any evidence in his possession to prove that the rights/title in the property transferred during F.Y. 2014-15 was acquired by the appellant in F.Y. 2013-14. There is every possibility that the appellant acquired the rights/title in the property in F.Y. 2014-15 and sold in the same financial year. In- fact, the appellant in its submission before AO has admitted that the rights/title in the property in question were acquired in F.Y. 2014-15 itself, and in the same year they were transferred. Thus, in absence of any specific document or evidence, the addition towards the expenditure on acquiring rights/title should not have been made in the impugned A.Y. As the appellant has transferred the rights/title in the property during FY. 2014-15, it can be reasonably presumed that appellant acquired the said rights/title in the property in the same F.Y. otherwise, the appellant could not have transferred it. Therefore, drawing a presumption that the appellant would have acquired the rights/title in the property during the P.Y. relevant to the impugned A.Y. was not the correct presumption and hence, the addition made by the AO towards unexplained investment in acquiring the rights/title cannot be sustained. Accordingly, the addition made by the AO of Rs. 14,00,00,000/- is hereby deleted. Ground No. 1,2 and 3 are treated to have been allowed.”

9.

Further for the assessment year 2015-16, the assessee declared this 14 crores income in its return, for assessment year 2015-16. In this respect, the Ld. counsel of the assessee filed two paper books which are kept in the record. The copy of the ITR, computation and balance-sheet are filed by the assessee with the profit and loss account. The assessee declared this amount in the head of the other income and no deduction was claimed for Ay 2015-16. The amount was declared as income in the head other income, vide page no. 28 of the paper book related assessment year 2015-16. The copy of the ledger and computation is also annexed in page no. 22 to 25 of the paper book for the assessment year 2015-16.

10.

The amount was declared by the AO in its return of immovable property. The Ld. AO further added this amount with the total income of the assessee. The Ld. CIT(A) is uphold the order of the Ld. AO. The Ld. counsel of the assessee filed the appeal before the ITAT.

11.

We heard the rival submission and considered the relevant documents which are filed during the hearing. For assessment year 2014-15, the amount was added back by the AO on the basis of the “deemed income” which was deleted by the Ld. CIT(A). We are inclining in the view of the Ld. CIT(A) and the order of the Ld. CIT(A) is upheld and the appeal of the Revenue is dismissed.

12.

For the assessment year 2015-16, the assessee already offered tax on income & declared amount of Rs. 14 crores in its profit & loss account in the head of other income. This income was adjusted with its business loss as per the provision of the Act. This amount was already offered for tax during filing of return under the Act.

Accordingly, this ground of appeal of the assessee is allowed.

13. Another issue raised by the Revenue in that the Ld. CIT(A) disallowed the cash sale amount of Rs. 1,18,66,076/- related to sales of Burnt Refractory Powder (BRP). The grievance of the Ld. AO was that this sale was made by cash and the assessee not able to given the satisfied explanation regarding the nature and source of the cash sales of BRP.

14.

The Ld. counsel pointed out that this particular sale was declared in the profit and loss account and this sale included in the turnover. Hence, the same amount should not be taxed doubly.

15.

We heard the rival submissions and considered the documents available in the record. The particular sale was declared in page no. 36 of the paper book related to assessment year 2014-15. The assessee declared the sale in its profit and loss account. So, the same amount cannot be taxed double.

Accordingly we upheld the order of the Ld. CIT(A).

In this regard this ground of appeal of the Revenue is dismissed.

16. The next issue is related to disallowance of business expenses amount of Rs.6,07,500/- by the Ld. AO for Ay 14-15. The Ld. CIT(A) upheld the order of the Ld. AO and confirmed the disallowance of business expenses amount of Rs. 6,07,500/-.

17.

In this regard, the assessee filed CO No. 13/PAN/2018 for Ay 14-15 for further adjudication before us.

18.

The same issue is evolved for the assessment year 2015-16. The Ld. AO disallowed the expenses amount of Rs.4 lacs and the same addition was upheld by the Ld. CIT(A). Accordingly, the assessee filed appeal before us bearing Ay 15-16.

19.

We are adjudicating both the appeals together as both the issues are common. The Ld. AO had examined the expenditure of Rs.10,35,963/- and accordingly the Ld. AO added back the adhoc expenditure amount of Rs.4 lacs for assessment year 2015-16.

For assessment year 2014-15, the assessee disallowed Rs.6,07,500/- related to wages to labours, freight on stores and consumables, freight on raw material.

The Ld. DR relied on the both the orders of the Revenue authorities.

20.

During hearing the Ld. counsel submitted the judgment in the case of Shanker Gauri Agro Product Pvt. Ltd. V. Asstt. CIT in dated 02.09.2019. As per the order, the disallowance cannot be done only on the basis of the cash payment and there should be specific conclusive findings for disallowance the same.

21.

We heard the rival submissions and considered the documents with the file, the Ld. counsel filed a list of expenses for all the years. The lists are containing

9 & Ors Asstt. CIT v. Prateek Alloys Pvt. Ltd. identity of person to` whom the payment was made. Some payments are made through bank account and identity of the parties is also submitted in the list. The finding of the Ld. AO is not proper. The addition of business expenditure cannot be done on adhoc basis. The ld AO did not find out the specific lacuna related expenditure of assessee for both the year.

Accordingly this grounds of appeals for AY 14-15 & 15-16 of the assessee are allowed.

22.

In the result, the appeals of the assessee are allowed and the appeal of the Revenue is dismissed.

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