ACIT, NEW DELHI vs M/S. RESOLVE ESTATES PVT. LTD., NOIDA

Income Tax Appellate Tribunal, DELHI BENCH: ‘F: NEW DELHI

Before: SHRI H.S. SIDHU & SHRI ANADEE NATH MISSHRA

(A) This appeal by Revenue is filed against the order of Learned Commissioner of Income Tax (Appeals)-36, New Delhi, [“Ld. CIT(A)”, for short] dated 27.02.2017 for Assessment Year 2012-13. The grounds of appeal are as under:

“1. On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the disallowance of Rs. 57,75,20,560/- on account of land development cost without doing proper enquiry and detailed scrutiny of the materials available as per Delhi High Court judgment in the case of M/s Jansampark Advertising and Marketing (P) Ltd., DT: 11/03/2015. Page 1 of 29

ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. 2. On the fact and under the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the disallowance of Rs. 72,38,028/- on account of Bank Guarantee Commission, as the CBDT Notification No. 56/2012 DT: 31/12/2012 come w.e.f. 01.01.2013 without retrospective effect. 3. The appellant craves to be allowed to add any fresh grounds of appeal and/ or delete or mend any of the grounds of appeal.”

(B) Assessment Order dated 30.03.2015 passed under Section 143(3) of Income Tax Act, 1961 (“I.T. Act”, for short) by the Assessing Officer (“AO”, for short) wherein total income was determined of Rs. 59,12,61,710/- as against the returned income of Rs. 65,03,122/-. The relevant portion of the Assessment Order dated 30.03.2015 is reproduced as under:

ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd.

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(C) The Assessee filed appeal before the Ld. CIT(A). Vide impugned appellate order dated 27.02.2017, the Ld. CIT(A) allowed the Assessee’s appeal and deleted the additions made by the Assessing Officer on account of disallowances of Development Cost (Rs.

ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. 57,75,20,560/-) as well as Bank Guarantee Commission (Rs. 72,38,028/-). The relevant portion of the aforesaid impugned appellate order dated 27.02.2017 of Ld. CIT(A) is reproduced as under:

”

(C.1) This present appeal has been filed by Revenue against the aforesaid impugned appellate order dated 27.02.2017 of Ld. CIT(A). At the time of hearing before us, the Learned Commissioner of Income Tax (Departmental Representative) [“Ld. CIT(DR)”, for short] strongly defended the order of the Assessing Officer and read out relevant portions of the Assessment Order to support of the addition made by the Assessing Officer. On the other hand, the Leaned Authorized Representative (“Ld. AR”, for short) for the Assessee relied on the aforesaid impugned appellate order dated 27.02.2017 of the Ld. CIT(A).

(D) We have heard both sides and perused the materials available on records. As far as first ground of appeal, relating to disallowance of Rs. 57,75,20,560/- on account of Land Development Cost is concerned, we find that the Ld. CIT(A) has deleted this addition holding that the amount was reflected in the income of the payee, M/s Era Infra Engineering Ltd. (“EIEL”, for short) and concluded that there was no loss of Revenue to the Department. The Ld. CIT(A) has further observed that the amount does not pertain

ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. to this year. However, on perusal of the impugned appellate order dated 27.02.2017 of the Ld. CIT(A), we find that it is silent on how the treatment of the amount by the payee EIEL in the books of account of EIEL becomes a material consideration in deciding the allowability of the expenditure in the hands of the assessee. Regardless of how the amount is treated by the payee in their books of accounts, what is determinative of allowability of the expenditure in the hands of the payer is whether the payment qualifies as a deduction in the hands of the assessee as per law. The impugned appellate order dated 27.02.2017 of the Ld. CIT(A) is non-speaking on this crucial aspect. Secondly, the impugned appellate order dated 27.02.2017 of Ld. CIT(A) is a non-speaking order as far as how the Ld. CIT(A) concluded that the amount does not pertain to this year. The detailed facts and circumstances narrated by the Assessing Officer in the Assessment Order, and the elaborate discussion in the Assessment Order on is non-allowability as per law, has not been rebutted by Ld. CIT(A) satisfactorily. Thus, we find that the order of the Ld. CIT(A) is a non-speaking order on her crucial observation that the amount does not pertain to this year. Though Ld. CIT(A) has stated that the matter was examined in the Assessment Year 2011-12, she has failed to pass a speaking order on how, the fact that it was examined in the Assessment Year 2011-12, precludes the Assessing Officer from examining the matter in Assessment Year 2012-13 and from making the disallowance in Assessment 2012-13. The detailed discussion in the Assessment Order once again not been adequately dealt with and rebutted by the Ld. CIT(A) and the impugned appellate order dated 27.02.2017 of Ld. CIT(A) is a non-speaking order in this regard.

ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. (D.1) In view of the foregoing, we are of the view that the Ld. CIT(A) should decide this issue afresh and pass a fresh appellate order, which should be a speaking order in all materials respects. Accordingly, we set aside this issue to the file of the Ld. CIT(A) with the direction to decide the issue afresh through a speaking order in accordance with law.

(E) The second ground of appeal pertains to disallowance of Rs. 72,38,028/- on account of Bank Guarantee Commission. The amount was disallowed by the Assessing Officer on the ground that this amount was required to be capitalized and could not have been allowed as Revenue expenditure. This ground of disallowance and the resulting addition has not been dealt with by the Ld. CIT(A) in her impugned appellate order dated 27.02.2017. The Ld. CIT(A) has deleted this addition on the ground that disallowance under Section 40(a)(ia) of I.T. Act was not warranted. The Ld. CIT(A) took notice of CBDT Circular No. 56/2012 dated 31.12.2012 on this issue. However, the fact remains that the disallowance was not made by the Assessing Officer by taking recourse to Section 40(a)(ia) of I.T. Act; and instead, the addition was made on the ground that it was capital expenditure. The impugned appellate order dated 27.02.2017 of Ld. CIT(A) is silent of this aspect and is a non-speaking order on the issue whether the amount in question was a revenue expenditure or a capital expenditure. Thus, even in respect of the aforesaid disallowance of Rs. 72,38,028/-; we find that impugned appellate order dated 27.02.2017 of Ld. CIT(A) is silent on crucial aspect of the matter. Therefore, we set aside this issue also to the file of the Ld. CIT(A) with the direction to decide the issue afresh through a speaking order in accordance with law.

ITA No.- 2771/Del/2017. M/s Resolve Estates Pvt. Ltd. (F) In the result, both the issues raised in the two grounds of appeal are restored to the file of the Ld. CIT(A) to decide this issue afresh in accordance with law through a fresh order which should be a speaking order in all materials respects. For statistical purposes, appeal is partly allowed.

Order pronounced in the open court on 16.01.20.

ACIT, NEW DELHI vs. M/S. RESOLVE ESTATES PVT. LTD., NOIDA