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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
Facts and circumstances and the additions Facts and circumstances and the additions challengedin these challengedin these appeals being connected, connected, both these appeals were heard together both these appeals were heard together and disposed off by way and disposed off by way of this order for convenience. of this order for convenience.
First, we take up the appeal of the Revenue in for take up the appeal of the Revenue in ITA No. 611 for take up the appeal of the Revenue in ITA No. 611 for assessment year 2011 assessment year 2011-12, which is in relation to order order u/s 143(3) of the Act dated 24.03.2014. The grounds of appeal are reproduced of the Act dated 24.03.2014. The grounds of appeal of the Act dated 24.03.2014. The grounds of appeal as under:
1. "On the facts "On the facts and in the circumstances of the case and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the and in law, the Ld. CIT(A) has erred in deleting the and in law, the Ld. CIT(A) has erred in deleting the disallowance made by the A0 of the business disallowance made by the A0 of the business disallowance made by the A0 of the business expenditure of Rs. 28,24,28,829/ expenditure of Rs. 28,24,28,829/- comprising of comprising of administrative administrative administrative expenses, expenses, expenses, marketing marketing marketing and selling and selling and selling expenses and finance expens expenses and finance expenses and treating the es and treating the same same same as as as capital capital capital work work work in in in progress, progress, progress, without without without considering the fact that assessee company had only considering the fact that assessee company had only considering the fact that assessee company had only one contract and therefore, entire expenses were one contract and therefore, entire expenses were one contract and therefore, entire expenses were liable to be capitalized as work in progress. liable to be capitalized as work in progress.
2. On the facts and in the circumstances of the ca On the facts and in the circumstances of the case and On the facts and in the circumstances of the ca in law, the Id. CIT(A) has erred in not appreciating in law, the Id. CIT(A) has erred in not appreciating in law, the Id. CIT(A) has erred in not appreciating that the assessee follows percentage completion that the assessee follows percentage completion that the assessee follows percentage completion method of accounting and is not carrying on any method of accounting and is not carrying on any method of accounting and is not carrying on any other business activity except construction of the other business activity except construction of the other business activity except construction of the residential project on hand, the entire business residential project on hand, the entire business residential project on hand, the entire business expenses expenses expenses claimed claimed claimed of of of Rs.28,24,28,829/- Rs.28,24,28,829/ Rs.28,24,28,829/ were correctly disallowed by the A. O. capitalizing it, and correctly disallowed by the A. O. capitalizing it, and correctly disallowed by the A. O. capitalizing it, and treating it as work treating it as work-in-progress of the project being progress of the project being constructed by the assessee. constructed by the assessee. 3. On the facts and in the circumstances of the case and On the facts and in the circumstances of the case and On the facts and in the circumstances of the case and in law, the Ld. CIT(A) in law, the Ld. CIT(A) has erred in placing reliance in has erred in placing reliance in respect of capitalization of expenses on the decision respect of capitalization of expenses on the decision respect of capitalization of expenses on the decision of the ITAT in case of sister concern of the assessee, of the ITAT in case of sister concern of the assessee, of the ITAT in case of sister concern of the assessee, Ms. Hiranandani Palace Gardens Pvt. Ltd. Vs ACIT Ms. Hiranandani Palace Gardens Pvt. Ltd. Vs ACIT Ms. Hiranandani Palace Gardens Pvt. Ltd. Vs ACIT (A.Y. (A.Y. 2009 2009-10, 10, ITA No.4579/M/2013 dated dated 03/12/2015) 03/12/2015) without without considering cons idering that that the the Department had not accepted the decision of the ITAT Department had not accepted the decision of the ITAT Department had not accepted the decision of the ITAT in the case and the appeal before the Hon ble in the case and the appeal before the Hon ble in the case and the appeal before the Hon ble
M/s Sunny Vista Realtors 3 ITA Nos. No. 610 & 611/M/2023 ITA No Bombay High Court (Appeal us. 260A filed on Bombay High Court (Appeal us. 260A filed on Bombay High Court (Appeal us. 260A filed on 14/09/2016, vide Appeal No. ITXA/212/2017 for A. 14/09/2016, vide Appeal No. ITXA/212/2017 for A. 14/09/2016, vide Appeal No. ITXA/212/2017 for A. Y. 2009 Y. 2009-10) is pending for adjudication.
4. On the facts and in the circumstances of the case and e facts and in the circumstances of the case and e facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no in law, the Ld. CIT(A) has erred in holding that no in law, the Ld. CIT(A) has erred in holding that no adverse findings has been given by the AO in the adverse findings has been given by the AO in the adverse findings has been given by the AO in the Remand Report called for with respect to the Remand Report called for with respect to the Remand Report called for with respect to the additional evidences filed by the assessee and has additional evidences filed by the assessee and has additional evidences filed by the assessee and has deleted th deleted the other additions and disallowances made e other additions and disallowances made by the AO without considering the fact that in the by the AO without considering the fact that in the by the AO without considering the fact that in the remand report submitted to the CIT(A) on 28.07.2021, remand report submitted to the CIT(A) on 28.07.2021, remand report submitted to the CIT(A) on 28.07.2021, the the the A0 A0 A0 has has has categorically categorically categorically mentioned mentioned mentioned that that that the the the documents in support of its claim submitted by the documents in support of its claim submitted by the documents in support of its claim submitted by the assessee as addi assessee as additional evidences had already been tional evidences had already been dealt by the A0 during the assessment proceedings dealt by the A0 during the assessment proceedings dealt by the A0 during the assessment proceedings and a speaking order had been passed by the and a speaking order had been passed by the and a speaking order had been passed by the erstwhile AO after due consideration of these erstwhile AO after due consideration of these erstwhile AO after due consideration of these evidences." evidences."
At the outset, we may like to mention that despite notifying At the outset, we may like to mention that despite notifying At the outset, we may like to mention that despite notifying neither anyone attended on behalf of the assessee nor any r anyone attended on behalf of the assessee nor any r anyone attended on behalf of the assessee nor any adjournment was filed. We adjournment was filed. We were of the opinion that the assessee of the opinion that the assessee was not interesting in prosecuting the appeal not interesting in prosecuting the appeal and hence same was and hence same was heard exparte qua the assessee after hearing the argument qua the assessee after hearing the argument qua the assessee after hearing the arguments of the Ld. Departmental Representative (DR). Ld. Departmental Representative (DR).
Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 30.09.2011 return of income for the year under consideration on 30.09.2011 return of income for the year under consideration on 30.09.2011 declaring current year losses at Rs.29,12,14,681/ declaring current year losses at Rs.29,12,14,681/- -. The assessee further revised its return of income on 05.10.2012 declaring current its return of income on 05.10.2012 declaring current its return of income on 05.10.2012 declaring current year losses at Rs.27,42,19,208/ at Rs.27,42,19,208/-. The return of income filed by the . The return of income filed by the assessee was selected for scrutiny and statutory notices under the assessee was selected for scrutiny and statutory notices under the assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. The assessee company was Act were issued and complied with. The assessee company Act were issued and complied with. The assessee company incorporated on 08.05.2006 with the objective of real estate rated on 08.05.2006 with the objective of real estate rated on 08.05.2006 with the objective of real estate
M/s Sunny Vista Realtors 4 ITA Nos. No. 610 & 611/M/2023 ITA No development of special economic zone. The assessee was engaged in development of special economic zone. The assessee was engaged in development of special economic zone. The assessee was engaged in Construction and Development activity. The assessee followed Construction and Development activity. The assessee followed Construction and Development activity. The assessee followed percentage completion method percentage completion method for recognizing profit from the for recognizing profit from the projects of construction nstruction nstruction and and and development development development of of of real real real estate sinceinception of company. The assessee entered sinceinception of company. The assessee enteredinto agreements into agreements for sale of the SEZ units units, however no revenue was recognized from the however no revenue was recognized from the sale of the units, despite claimed to have followed percentage , despite claimed to have followed percentage , despite claimed to have followed percentage completion method completion method of accounting. The Assessing Officer after The Assessing Officer after considering submission of the assessee disallowed the claim of considering submission of the assessee disallowed the claim of considering submission of the assessee disallowed the claim of administrative and other expenses holding the same as part of the administrative and other expenses holding the same as part of the administrative and other expenses holding the same as part of the work in progress. The Assessing Officer also disallowed certain work in progress. The Assessing Officer also disallowed certain work in progress. The Assessing Officer also disallowed certain purchases and expens purchases and expenses as non-verifiable. In this manner n this manner, the Assessing Officer made addition of Rs.28,24,829/ Assessing Officer made addition of Rs.28,24,829/- for expenditure capitalized and Rs.37,15,319/ capitalized and Rs.37,15,319/- for purchases/expenses non for purchases/expenses non- verifiable. On further appeal, the Ld. CIT(A) deleted both the verifiable. On further appeal, the Ld. CIT(A) deleted both the verifiable. On further appeal, the Ld. CIT(A) deleted both the additions. Regarding the Fi additions. Regarding the First addition, the Ld. CIT(A) has relied on rst addition, the Ld. CIT(A) has relied on the decision of the Tribunal in the case of the assessee in the the decision of the Tribunal in the case of the assessee in the the decision of the Tribunal in the case of the assessee in the preceding year as well as decision in the case of sister concerns and preceding year as well as decision in the case of sister concern preceding year as well as decision in the case of sister concern deleted the addition of administrative and other expenses. deleted the addition of administrative and other expenses. deleted the addition of administrative and other expenses. Regarding the second Regarding the second addition, the Ld. CIT(A) called for the remand addition, the Ld. CIT(A) called for the remand report on the additional evidences filed by the assessee. However, report on the additional evidences filed by the assessee. However, report on the additional evidences filed by the assessee. However, the Ld. Assessing Officer merely objected admissibility of the the Ld. Assessing Officer merely objected admissibility of the the Ld. Assessing Officer merely objected admissibility of the additional evidence and did not give specific comment on the additional evidence and did not give specific comment on the additional evidence and did not give specific comment on the allowability of such expenses. The Ld. CIT(A) observing that no uch expenses. The Ld. CIT(A) observing that no uch expenses. The Ld. CIT(A) observing that no M/s Sunny Vista Realtors 5 ITA Nos. No. 610 & 611/M/2023 ITA No adverse comments were given by the Assessing were given by the Assessing Officer, Officer, therefore, he deleted the addition. deleted the addition.
Aggrieved, the Revenue is in appeal before the Tribunal by way Aggrieved, the Revenue is in appeal before the Tribunal by way Aggrieved, the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. of raising grounds as reproduced above.
We have heard submission of the Ld. DR and perused the heard submission of the Ld. DR and perused the heard submission of the Ld. DR and perused the relevant material on record. As far as ground No relevant material on record. As far as ground Nos. 1 . 1 to 3 of appeals regarding capitalization capitalization of administrative and other expenses is other expenses is concerned, we find that the Assessing Officer has capitalize e find that the Assessing Officer has capitalize e find that the Assessing Officer has capitalized the same as no revenue from the project has been o revenue from the project has been recognized, despite recognized, despite the entire project being the entire project being single project. According to the Assessing ccording to the Assessing Officer entire expenses including direct expenses on the project Officer entire expenses including direct expenses on the project Officer entire expenses including direct expenses on the project along with administrative marketing and other expense should be along with administrative marketing and other expense should be along with administrative marketing and other expense should be capitalized as work in progress. But the Ld. CIT(A) has referred to capitalized as work in progress. But the Ld. CIT(A) has referred to capitalized as work in progress. But the Ld. CIT(A) has referred to the decision of the Tribunal in t the decision of the Tribunal in the case of the assessee in case of the assessee in ITA No. 4580/M/2013 for assessment year 2009 4580/M/2013 for assessment year 2009-10. In the said decision 10. In the said decision the Tribunal noted that assessee was following percentage the Tribunal noted that assessee was following percentage the Tribunal noted that assessee was following percentage completion method of accounting regularly in the assessment year completion method of accounting regularly in the assessment year completion method of accounting regularly in the assessment year 2010-11. The Assessing Officer accep 11. The Assessing Officer accepted the deductibility deductibility of the identical nature of the expenses in the assessment passed u/s identical nature of the expenses in the assessment passed u/s identical nature of the expenses in the assessment passed u/s 143(3) of the Act. The Tribunal (supra) after considering the facts of 143(3) of the Act. The Tribunal (supra) after considering the fact 143(3) of the Act. The Tribunal (supra) after considering the fact the case agreed with the contention of the Ld. Counsel for the agreed with the contention of the Ld. Counsel for the agreed with the contention of the Ld. Counsel for the assessee that employee’s employee’s expenses referred were the salary paid to the salary paid to the employees for looking after for looking after the administrative office the administrative office of project construction and therefore it was part of the administrative construction and therefore it was part of the administrative construction and therefore it was part of the administrative
M/s Sunny Vista Realtors 6 ITA Nos. No. 610 & 611/M/2023 ITA No expenses. Therefore, administration, Therefore, administration, salary and marketing expenses marketing expenses were to be charged to t to be charged to the profit and loss account and to be he profit and loss account and to be excluded from the cost of the inventory the cost of the inventory or closing work in progress. closing work in progress. Thus, the Tribunal held that only direct expenses could be charged the Tribunal held that only direct expenses could be charged the Tribunal held that only direct expenses could be charged to work in progress and the expenses in the nature of salary, to work in progress and the expenses in the nature of to work in progress and the expenses in the nature of administrative, marke marketing and selling expenses were to be debited ting and selling expenses were to be debited to the profit and loss account and to be account to the profit and loss account and to be accounted for the purpose of computing profit and gains from business and profession as per of computing profit and gains from business and profession as per of computing profit and gains from business and profession as per the relevant provisions of the Act. However, we note that for the the relevant provisions of the Act. However, we note that the relevant provisions of the Act. However, we note that year under construction, onstruction, the Ld. CIT(A) has presumed that the the Ld. CIT(A) has presumed that the assessee commenced the project and started construction activity assessee commenced the project and started construction activity assessee commenced the project and started construction activity in the year under construction and the project being in the initial in the year under construction and the project being in the year under construction and the project being development. But actually , actually , the assessee commenced its activity he assessee commenced its activity since 2006 and therefore, 6 and therefore, in the circumstances, in the circumstances, it need to be ascertained whether substantial construction has been carried out whether substantial construction has been carried out whether substantial construction has been carried out on the project and if and if so, the assessee is required to recognized the assessee is required to recognized revenue from the project and accordingly allocate the expenses revenue from the project and accordingly allocate the expenses revenue from the project and accordingly allocate the expenses thereafter to work out the profit er to work out the profit, following the percentage following the percentage completion method, which the assessee has not shown. Therefore, which the assessee has not shown. Therefore, in the facts and circumstances, we feel it appropriate to restore this in the facts and circumstances, we feel it appropriate to restore this in the facts and circumstances, we feel it appropriate to restore this issue back to the file of the Ld. CIT(A) for deciding afresh after issue back to the file of the Ld. CIT(A) for deciding afresh after issue back to the file of the Ld. CIT(A) for deciding afresh after taking into consideration taking into consideration, the percentage of work completed completed and if substantial work is carried out on the project substantial work is carried out on the project, then then revenue has to be recognized and administrative and marketing expenses has to be be recognized and administrative and marketing expenses has to be be recognized and administrative and marketing expenses has to be deducted thereafter from the profit from the project computed as deducted thereafter from the profit from the project co deducted thereafter from the profit from the project co
M/s Sunny Vista Realtors 7 ITA Nos. No. 610 & 611/M/2023 ITA No
per the percentage completion method. The ground per the percentage completion method. The grounds of appeal of the Revenue are accordingly allowed are accordingly allowed for statistical purposes. for statistical purposes.
8. As far as ground As far as grounds related to issue of non-verifiable verifiable purchase expense, the Ld. CIT(A) deleted the Ld. CIT(A) deleted the addition observing the addition observing as under:
“19. Considering the fact that no adverse finding has been 19. Considering the fact that no adverse finding has been 19. Considering the fact that no adverse finding has been given by the A.O. in the remand report with respect to the given by the A.O. in the remand report with respect to the given by the A.O. in the remand report with respect to the additional evidences filed and submission of the assessee, additional evidences filed and submission of the assessee, additional evidences filed and submission of the assessee, there is no occasion for impugned additions as resorted to by there is no occasion for impugned additions as resorted to by there is no occasion for impugned additions as resorted to by the A.O. Hence, it is held that purchases of Rs. 88,28,374/ . Hence, it is held that purchases of Rs. 88,28,374/ . Hence, it is held that purchases of Rs. 88,28,374/- and expenses of Rs. 4,87,97,603/ and expenses of Rs. 4,87,97,603/- as unexplained bogus and as unexplained bogus and reducing the same from WIP are unjustified. Further, reducing the same from WIP are unjustified. Further, reducing the same from WIP are unjustified. Further, purchases purchases of of Rs. Rs. 28,04,194/- 28,04,194/ and and expenses expenses of of Rs. Rs. 37,15,395/- as unexplained, are uncalled f as unexplained, are uncalled for. Finally purchases purchases of of Rs. Rs. 11,71,916/- 11,71,916/ and and expenses expenses of of Rs. Rs. 44,60,080/- as unexplained being excess in difference, as unexplained being excess in difference, deserved to be deleted. Thus, grounds of appeal no. 4, 5 & 6 deserved to be deleted. Thus, grounds of appeal no. 4, 5 & 6 deserved to be deleted. Thus, grounds of appeal no. 4, 5 & 6 are Allowed. are Allowed.”
9. We have heard submission of ld DR and perused the material We have heard submission of ld DR and perused the material We have heard submission of ld DR and perused the material on record. The Ld CIT(A) has deleted the addition for the reason record. The Ld CIT(A) has deleted the addition for the reason record. The Ld CIT(A) has deleted the addition for the reason that no comments were given by the AO on additional evidences. In that no comments were given by the AO on additional evidences. that no comments were given by the AO on additional evidences. our opinion, if the Assessing Officer has not given any comment on our opinion, if the Assessing Officer has not given any comment on our opinion, if the Assessing Officer has not given any comment on the additional evidence the additional evidences while objecting admissibility, then admissibility, then the Ld. again called for CIT(A) after admitting the evidence should have CIT(A) after admitting the evidence should have again comments on the merit of the expenses which the Ld. CIT(A) has comments on the merit of the expenses which the Ld. CIT(A) has comments on the merit of the expenses which the Ld. CIT(A) has . Further, in view of decision of the Hon’ble Delhi High Hon’ble Delhi High not followed. Further, in Court dated 11/03/2015 dated 11/03/2015 in the case of Jansampark ampark Advertising and Marketing p ltd and Marketing p ltd in ITA 525/2014,the Ld. CIT(A) himself should the Ld. CIT(A) himself should have carried out inquiries on those additional have carried out inquiries on those additional evidence, which evidence, which he has not done. In the has not done. In the facts and circumstances, we feel it appropriate circumstances, we feel it appropriate to restore this issue also back to the file of the Ld. CIT(A) for issue also back to the file of the Ld. CIT(A) for issue also back to the file of the Ld. CIT(A) for adjudication afresh after following due procedure of law. afresh after following due procedure of law. afresh after following due procedure of law.
M/s Sunny Vista Realtors 8 ITA Nos. No. 610 & 611/M/2023 ITA No
Now, we take up the appeal of the Revenue in for we take up the appeal of the Revenue in ITA No. 610 for we take up the appeal of the Revenue in ITA No. 610 for assessment year 2011 assessment year 2011-12 arising from the order passed u/s 153C 12 arising from the order passed u/s 153C of the Act by the Assessing Officer Assessing Officer dated 28.03.2016. The grounds 28.03.2016. The grounds raised by the Revenue are reproduced as under: raised by the Revenue are reproduced as under:
"In the facts and in the circumstances of the case and in "In the facts and in the circumstances of the case and in "In the facts and in the circumstances of the case and in law, the Ld. CIT(4) has erred in not appreciating the fact law, the Ld. CIT(4) has erred in not appreciating the fact law, the Ld. CIT(4) has erred in not appreciating the fact that there is nothing in the language of the provisions that there is nothing in the language of the that there is nothing in the language of the which would indicate that the assessment is restricted which would indicate that the assessment is restricted which would indicate that the assessment is restricted to incriminating material or the basis of the assessment to incriminating material or the basis of the assessment to incriminating material or the basis of the assessment would be that which is discovered during the search or would be that which is discovered during the search or would be that which is discovered during the search or during the process contemplated by Section 132A of the during the process contemplated by Section 132A of the during the process contemplated by Section 132A of the Income Tax Act, 1961 a Income Tax Act, 1961 and that this view finds full nd that this view finds full support from the judgement of the Hon'ble Delhi High support from the judgement of the Hon'ble Delhi High support from the judgement of the Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar Bhatia, 352 ITR Court in the case of CIT Vs. Anil Kumar Bhatia, 352 ITR Court in the case of CIT Vs. Anil Kumar Bhatia, 352 ITR 493 (Del) and the judgement of the Karnataka High 493 (Del) and the judgement of the Karnataka High 493 (Del) and the judgement of the Karnataka High Court in the case of Canara Housing Development Court in the case of Canara Housing Development Court in the case of Canara Housing Development Company Vs. DCIT, 27 Company Vs. DCIT, 274 CTR 122 (Kar).
2. In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in placing reliance on law, the Ld. CIT(A) has erred in placing reliance on law, the Ld. CIT(A) has erred in placing reliance on various judicial pronouncements including in the various judicial pronouncements including in the various judicial pronouncements including in the Warehousing cases of CIT Vs. Continental Warehousing Warehousing cases of CIT Vs. Continental Warehousing Warehousing cases of CIT Vs. Continental Warehousing Corporation, All Cargo Glob Corporation, All Cargo Global Logistics Vs. DCIT, etc., al Logistics Vs. DCIT, etc., without appreciating that these judgements have not without appreciating that these judgements have not without appreciating that these judgements have not been accepted by the Department and in fact, SLP filed been accepted by the Department and in fact, SLP filed been accepted by the Department and in fact, SLP filed by the Department against Bombay High Court's order by the Department against Bombay High Court's order by the Department against Bombay High Court's order in the case of Continental Warehousing Corporation in the case of Continental Warehousing Corporation in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd (Nhava Sheva) Ltd., has been admitted by the Hon'ble ., has been admitted by the Hon'ble Apex Court [vide order dated 12.10.2015 in Special Apex Court [vide order dated 12.10.2015 in Special Apex Court [vide order dated 12.10.2015 in Special Leave to Appeal (C) CC 18506/20157 and is pending Leave to Appeal (C) CC 18506/20157 and is pending Leave to Appeal (C) CC 18506/20157 and is pending for adjudication. for adjudication. 3. In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in law, the Id. CIT(4) has erred in not appreci law, the Id. CIT(4) has erred in not appreciating that the ating that the assessee follows percentage completion method of assessee follows percentage completion method of assessee follows percentage completion method of accounting and is not carrying on any other business accounting and is not carrying on any other business accounting and is not carrying on any other business activity except construction of the residential project on activity except construction of the residential project on activity except construction of the residential project on hand, and therefore the depreciation and amortization hand, and therefore the depreciation and amortization hand, and therefore the depreciation and amortization expenses of Rs.52,96,960/ expenses of Rs.52,96,960/- were correctly disallowed were correctly disallowed by the 10 by capitalizing it. by the 10 by capitalizing it.
M/s Sunny Vista Realtors 9 ITA Nos. No. 610 & 611/M/2023 ITA No
4. In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that law, the Ld. CIT(A) has erred in not appreciating that law, the Ld. CIT(A) has erred in not appreciating that assessee company had only one contract and therefore, assessee company had only one contract and therefore, assessee company had only one contract and therefore, entire expenses were liable to be entire expenses were liable to be therefore, capitalized therefore, capitalized as work in progress. as work in progress.
5. In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that law, the Ld. CIT(A) has erred in not appreciating that law, the Ld. CIT(A) has erred in not appreciating that purchases purchases purchases and and and expenses expenses expenses which which which remained remained remained unexplained/unverifiable/bogus were rightly reduced unexplained/unverifiable/bogus were rightly reduced unexplained/unverifiable/bogus were rightly reduced by the A by the A0 from Capital work-in-progress and/or added progress and/or added to the total income of the assessee company. to the total income of the assessee company. to the total income of the assessee company. 6. In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in In the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that law, the Ld. CIT(A) has erred in not appreciating that law, the Ld. CIT(A) has erred in not appreciating that the interest income of Rs.72,55,7471 earned on surplus the interest income of Rs.72,55,7471 earned on surplus the interest income of Rs.72,55,7471 earned on surplus funds of the assessee, which did not have direct and funds of the assessee, which did not have direct and funds of the assessee, which did not have direct and proximate relationship with the business activity of the proximate relationship with the business activity of the proximate relationship with the business activity of the assessee, would fall under the head 'Income from other assessee, would fall under the head 'Income from other assessee, would fall under the head 'Income from other Sources' as has held by the jurisdictional High Court in Sources' as has held by the jurisdictional High Court in Sources' as has held by the jurisdictional High Court in the case of Swami Spice Mills Pvt the case of Swami Spice Mills Pvt. Ltd. (332 ITR 288). . Ltd. (332 ITR 288). 11. We find that the Assessing Officer has mainly made additions We find that the Assessing Officer has mainly made additions We find that the Assessing Officer has mainly made additions which were made by him in the original assessment proceedings which were made by him in the original assessment proceedings which were made by him in the original assessment proceedings u/s 143(3) of the Act. The Ld. CIT(A) has deleted the addition on the u/s 143(3) of the Act. The Ld. CIT(A) has deleted the addition on the u/s 143(3) of the Act. The Ld. CIT(A) has deleted the addition on the ground that there was no incriminatin ground that there was no incriminating material qua the addition g material qua the addition made and the assessment being in the category of the made and the assessment being in the category of the made and the assessment being in the category of the completed/non-abated assessment no assessment could have been abated assessment no assessment could have been abated assessment no assessment could have been made otherwise made incriminating material. The relevant finding made otherwise made incriminating material. The relevant finding made otherwise made incriminating material. The relevant finding of the Ld. CIT(A) is reproduced as under: of the Ld. CIT(A) is reproduced as under:
“7.3 I have carefully considered the facts of the case, 7.3 I have carefully considered the facts of the case, 7.3 I have carefully considered the facts of the case, submissions of the Appellant, the observations of the submissions of the Appellant, the observations of the submissions of the Appellant, the observations of the AO contained in the assessment order, various AO contained in the assessment order, various AO contained in the assessment order, various judgements and other materials on record on this judgements and other materials on record on this judgements and other materials on record on this issue. In this Ground, the appellant has contended issue. In this Ground, the appellant has contended issue. In this Ground, the appellant has contended that the assessment order passed us 153C r.w.s hat the assessment order passed us 153C r.w.s hat the assessment order passed us 153C r.w.s 143(3) of the Act for the impugned assessment year is 143(3) of the Act for the impugned assessment year is 143(3) of the Act for the impugned assessment year is bad in law as the additions made in the assessment bad in law as the additions made in the assessment bad in law as the additions made in the assessment
M/s Sunny Vista Realtors 10 ITA Nos. No. 610 & 611/M/2023 ITA No order are not based on or connected with any order are not based on or connected with any order are not based on or connected with any incriminating documents found or seized during the incriminating documents found or seized during the incriminating documents found or seized during the search pr search proceedings, which can be relatable to the oceedings, which can be relatable to the appellant. appellant. 7.4 It has been observed from the assessment order 7.4 It has been observed from the assessment order 7.4 It has been observed from the assessment order that the AO has not highlighted any incriminating that the AO has not highlighted any incriminating that the AO has not highlighted any incriminating material found and or seized during the search material found and or seized during the search material found and or seized during the search action, which can be relatable to the appellant, based action, which can be relatable to the appellant, based action, which can be relatable to the appellant, based on which the impugned additions are made. The n which the impugned additions are made. The n which the impugned additions are made. The appellant, on the other hand, has emphatically stated appellant, on the other hand, has emphatically stated appellant, on the other hand, has emphatically stated that the impugned additions are not based on any that the impugned additions are not based on any that the impugned additions are not based on any material found/seized during the course of search material found/seized during the course of search material found/seized during the course of search action at the premises of the appellant. The appellant action at the premises of the appellant. The appellant action at the premises of the appellant. The appellant has also relied on a no. of judicial decisions on this also relied on a no. of judicial decisions on this also relied on a no. of judicial decisions on this issue. 7.5 On perusal of the impugned assessment order, it 7.5 On perusal of the impugned assessment order, it 7.5 On perusal of the impugned assessment order, it is evident that the A0 has not referred to any seized is evident that the A0 has not referred to any seized is evident that the A0 has not referred to any seized material found during the course of search to make material found during the course of search to make material found during the course of search to make the impugned additions. The due date for issuing the impugned additions. The due date for the impugned additions. The due date for notice u/s 143(2) had already expired on the date of notice u/s 143(2) had already expired on the date of notice u/s 143(2) had already expired on the date of search or the date of issue of notice u/s 143(2) in the search or the date of issue of notice u/s 143(2) in the search or the date of issue of notice u/s 143(2) in the current proceeding, which was issued on 24.08.2015. current proceeding, which was issued on 24.08.2015. current proceeding, which was issued on 24.08.2015. Since, the proceedings for A.Y. 2011 Since, the proceedings for A.Y. 2011-12 had not 12 had not abated, the contention of the appellan abated, the contention of the appellant that the AO t that the AO was empowered to make additions based on the was empowered to make additions based on the was empowered to make additions based on the incriminating material found and seized during the incriminating material found and seized during the incriminating material found and seized during the course of search operation, appears to Conte be true, course of search operation, appears to Conte be true, course of search operation, appears to Conte be true, as held in a no. of judicial decisions including the as held in a no. of judicial decisions including the as held in a no. of judicial decisions including the decision of jurisdictional High Court. decision of jurisdictional High Court. 7.6 Before proceeding further, it is necessary to 7.6 Before proceeding further, it is necessary to 7.6 Before proceeding further, it is necessary to apprise with the legal principles settled by Hon'ble apprise with the legal principles settled by Hon'ble apprise with the legal principles settled by Hon'ble Jurisdictional High Court and other courts on this Jurisdictional High Court and other courts on this Jurisdictional High Court and other courts on this issue. The Hon'ble Bombay High Court in the case of issue. The Hon'ble Bombay High Court in the case of issue. The Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [374 ITR CIT vs. Continental Warehousing Corporation [374 I CIT vs. Continental Warehousing Corporation [374 I 645], has held that when the assessment has 645], has held that when the assessment has 645], has held that when the assessment has attained finality, then the AO while passing the attained finality, then the AO while passing the attained finality, then the AO while passing the independent assessment order us 153C of the Act independent assessment order us 153C of the Act independent assessment order us 153C of the Act can't disturb the assessment / reassessment order can't disturb the assessment / reassessment order can't disturb the assessment / reassessment order which has attained finality, unless the materials which has attained finality, unless the materials which has attained finality, unless the materials gathered in gathered in the course of the proceedings us 132 of the course of the proceedings us 132 of the Act establish that the reliefs granted under the the Act establish that the reliefs granted under the the Act establish that the reliefs granted under the M/s Sunny Vista Realtors 11 ITA Nos. No. 610 & 611/M/2023 ITA No finalized assessment/reassessment were contrary to finalized assessment/reassessment were contrary to finalized assessment/reassessment were contrary to the facts unearthed during the course of search the facts unearthed during the course of search the facts unearthed during the course of search operation. operation.”
We have heard submission of the Ld. DR and perused the We have heard submission of the Ld. DR and perused the We have heard submission of the Ld. DR and perused the relevant material on record. It is undisputed that no assessment relevant material on record. It is undisputed that no assessment relevant material on record. It is undisputed that no assessment was pending as on the date of the search as on the date of the search as far as the assessment as far as the assessment year is concerned and therefore, the assessment is in the category and therefore, the assessment is in the category and therefore, the assessment is in the category of the non-abated assessment. Hence assessment. Hence, no addition could have been , no addition could have been made without the aid of the incriminating material as held by the made without the aid of the incriminating material as held by made without the aid of the incriminating material as held by Hon’ble Bombay High Court in the case of Continental Hon’ble Bombay High Court in the case of Continental Hon’ble Bombay High Court in the case of Continental Warehousing Corporation 374 ITR 645 (Bombay). Since in the Warehousing Corporation 374 ITR 645 (Bombay). Warehousing Corporation 374 ITR 645 (Bombay). assessment order,there is no reference to there is no reference to any incriminating any incriminating material qua the additions made and therefore, no addition could material qua the additions made and therefore, no addition could material qua the additions made and therefore, no addition could have been sustained. We do not find any error in the order of the have been sustained. We do not find any error in the order of the have been sustained. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly Ld. CIT(A) on the issue in dispute and accordingly, , we uphold the same. However, we may like to mention that as far as computation we may like to mention that as far as computation we may like to mention that as far as computation of the total income for the purpose of assessment u/s 153A is of the total income for the purpose of assessment u/s 153A is of the total income for the purpose of assessment u/s 153A is concerned, the Assessing Officer should the Assessing Officer should begin with the returned with the returned income and thereafter he should have income and thereafter he should have added the added the additions made us/ 143(3) of the order, order, which have been sustained by the which have been sustained by the latest order of appellate authority. Thereafter, he could have further authority. Thereafter, he could have further authority. Thereafter, he could have further added any additions based on the incriminating material. The any additions based on the incriminating material. The any additions based on the incriminating material. The Assessing Officer is accordingly Assessing Officer is accordingly required to compute the final compute the final total income under order passed u/s 153A of the Act. The ground der passed u/s 153A of the Act. The grounds of the der passed u/s 153A of the Act. The ground Revenue are accordingly dismissed. Revenue are accordingly dismissed.
M/s Sunny Vista Realtors 12 ITA Nos. No. 610 & 611/M/2023 ITA No
In the result, the appeal in is allowed for In the result, the appeal in ITA NO. 611 is allowed for In the result, the appeal in ITA NO. 611 is allowed for statistical purposes whereas appeal in ITA No. 610 is dismissed. statistical purposes whereas appeal in ITA No. 610 is dismissed. statistical purposes whereas appeal in ITA No. 610 is dismissed.