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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PRAMOD KUMAR, VP & SHRI AMIT SHUKLA, JM
O R D E R
Per Amit Shukla, Judicial Member:
The aforesaid appeal has been filed by the assessee against the impugned order dated 27.12.2021, passed by National Faceless Appeal Centre (NFAC), Delhi in relation to order passed u/s 144C Dosti Realty Ltd. for the AY 2015-16. The assessee has raised the following grounds of appeal:-
Being aggrieved by the order passed by the learned CIT( Appeals) National Faceless Appeal Centre, Delhi (hereinafter referred to as 'learned CIT(A)), this appeal is preferred on the following grounds , which are without prejudice to one another: 1) Without prejudice to the pending quantum appeal, on facts and circumstances of the case and in law, learned CIT(A) erred in dismissing the appeal of the appellant holding that the issues under consideration were debatable issues and cannot be rectified under section 154. 2) Without prejudice to the pending quantum appeal, on facts and circumstances of the case and in law learned CIT(A) erred in not appreciating that once certain expenses are considered as project cost and not period cost the same needs to be added to total estimated work expenses also. Addition of Rs. 18,05,16,647/- in numerator only without adding to the denominator being an apparent mistake from the the record, dismissal of the grounds of appeal is bad in law. 3) Without prejudice to the pending quantum appeal, on facts and circumstances of the case and in law learned CIT(A) erred in not appreciating that addition of Finance Cost Rs. 10,75,29,743/- as cost in work in progress means the expenses as per learned AO are for the purpose of carrying on the construction work and not Dosti Realty Ltd. for earning exempt income. Addition of the same amount again for disallowance under section 14A leads to double addition and is apparent from the record. Dismissal of the grounds to rectify such apparent mistake is bad in law. 4) Your Appellant craves leave to add, amend, alter, modify or delete all or any of the above grounds of appeal.
2. At the outset Ld. Counsel for the assessee submitted that in this case assessment order passed u/s 143(3) was passed on 28.12.2017, wherein following expenses were disallowed which were debited to the Profit & Loss Account and carried out the same to Work-in-Progress in respect of a project:-
Finance cost Rs.10,75,29.743/- Marketing expenses Rs. 6,33,55,619/- Legal & Professional Fees Rs. 35,41,650/- Brokerage expenses Rs. 60,89,635/- Rs.18,05,16,647/-
3. Against the said order, assessee preferred appeal before the First Appellate Authority which is pending for adjudication. In the mean time, assessee has filed an application for rectification u/s 154 before the AO vide letter dated 11.01.2018 inter alia stating as under:-
Dosti Realty Ltd. With regard to Finance cost, during the year under consideration our client has incurred interest of Rs.31,50,67,209/-. Our client has debited Rs.20,75,37,466/- to Land and development account as the same is directly related to the Loan which is utilized for the purpose of construction of the project. The balance amount of Rs.10.75.29.743/- represents interest on loan utilized for investment in Optionally Fully Convertible Debentures of Friends Development Corporation (Imperia) Ltd. and interest paid on Vehicle Loan. Our client has received interest of Rs.16,23,78,223/-on Debentures during the year under consideration which has been offered to tax. During the course of hearing on 27lh December 2017 our client had filed submissions in respect thereof enclosing copy of relevant bank statement wherein payments made for investment out of loan amount in debentures are reflected. It appears that you have overlooked the same while passing the order as there is no reference of the same in the order. We therefore submit that our client has correctly claimed interest of Rs.10,75,29,743/- as revenue expenditure. Without prejudice, further in para 3.10 of your order you have worked out income of Rs.34,73,72,263/- on percentage completion method as profit of the project of the Financial Year 2014-15 i.e. assessment year 2015-16. On going through the working we find that you have added Rs.18,08,06,792/- being expenses stated in para 1 herein above ( correct amount is Rs.18,05,16,647/-) by treating the same as Work In Progress and added to actual cost incurred in the said working. However, you have not added the Dosti Realty Ltd. same to denominator as part of total estimated cost of the project. Therefore the percentage completion considered by you at 69.23% is required to be corrected as 65.94%. You are requested to kindly compute the correct profit of the project after adding the same to the total estimated cost of the project.
You have disallowed Rs.98,49,146/- u/s. 14A of the Act, working of which is given in para 5.19 of your order. In the said working you have taken Finance Cost of Rs.10,75,29,743/- as amount of expenditure incurred by way of interest which is not directly attributable to any particular income and have disallowed the expenses of Rs. 79,28,667/-. You have also included the said Finance cost in Work in Progress. Therefore the said amount of Rs10,75,29,743/- cannot be considered once again which constitute a mistake apparent from record.
You have also not given credit for MAT of Rs.1,47,98,331/- to which our client is entitled to u/s. 115JAA of the Act.
You have given credit for tax deducted al source of Rs.1,62,37,823/- as against Rs.2,47,59,971/- to which our client is entitled to as per 26AS copy of which is enclosed herewith.
5. You have charged interest of Rs.14,91,562/- U/S.234A of the Act. In this connection we are instructed to state that our client is not liable to any interest u/s.234A as the return was filed by our client on 29"1 November 2015 i.e. before the due date u/s. 139(1) of the Act i e 30m November 2015.
Dosti Realty Ltd.
It appears that you have computed interest u/s. 234C of the assessed income whereas the provisions of section 234C categorically required such computation on the basis of the returned income. As these constitute mistakes apparent from record, you are requested to kindly rectify the same by passing an appropriate order u/s. 154 of the Act.
4. Ld. AO in so far as certain expenditure disallowed in the Profit & Loss Account and carried to WIP, did not accept the same and held that same has already taken into account in the order passed u/s 143(3) and also rejected the contention regarding the disallowance of Rs. 98,49,146/-.
Ld. First Appellate Authority has confirmed the said action of AO stating that these are debatable issue which cannot be rectified u/s 154 of the Act.
6. Ld. Counsel for the assessee submitted that Ld. CIT (A) instead of deciding the appeal filed against the order u/s 143(3) has dismissed the appeal filed in relation to order passed u/s 154. However, if the issue is decided in the main appeal then, the present rectification application will be infructuous. Therefore, he Dosti Realty Ltd. requested that the present appeal should be restored back to the file of Ld. CIT (A) to decide after the quantum of appeal u/s 143(3) first. On the other side, Ld. DR also has no objection.
After considering the aforesaid submission, we accept the contention of Ld. Counsel for the assessee that, once the same very issues are decided /adjudicated by the Ld. First Appellate Authority in the quantum proceedings u/s 143(3), then present appeal relating to proceedings u/s 154 on the same will become purely academic. Accordingly, we set aside this appeal to the file of Ld. First Appellate Authority of NFAC to first decide the quantum of appeal against the order passed u/s 143(3); and then decide the fate of the present proceedings u/s 154 of the Act.
In the result, the appeal filed by the assessee stands allowed for statistical purposes.