VISHNU APARTMENTS PVT. LTD.,,JAIPUR vs. ACIT, NEW DELHI

Appellant, M/s. Vishnu Apartments Pvt. Ltd. (hereinafter referred to as the ‘assessee’) by filing the present appeal being 27.01.2012 passed by the Commissioner of Income-tax (Appeals)-I, New Delhi qua the assessment year 2006-07 on the grounds inter alia that:- “Ground No.1: The Ld. Commissioner of Income Tax (Appeals) -1, New Delhi (hereinafter referred to as 'CIT(A)') has erred in law and in the fact & circumstances of the case by passing the order dated 27.01.2012 u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as 'The Act'). The order passed by the CIT(A) is illegal being against the principles of natural justice and against the provisions of the Act.

Ground No.2: The CIT(A) has erred on facts and circumstances of the case in confirming the addition made by the Assessing Officer (herein after referred to as "AO") amounting to Rs.5,30,38,150 on account of alleged gain arising out of the sale of land without appreciating the facts in proper perspective especially the fact that the land sold out was part of integrated project and the sale consideration amounted to recoveries from the project.

Finding the details given by the assessee as to its integrated project as not sustainable on facts and law, Assessing Officer (AO) disallowed adjustment of expenses which were not related to project on the ground that the assessee has sold lands which were lying as stock-in-trade in different places other than the place where the main project was carrying out and thereby made an addition of Rs.5,30,38,150/- (Rs.12,66,00,000/- - Rs.7,35,61,850/- = Rs.5,30,38,150/-).

Assessee carried the matter by way of an appeal before the ld. CIT (A) who has confirmed the addition by dismissing the appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

At the very outset, ld. AR for the assessee contended that to prove the fact that the project was integrated one, assessee had produced resolution and application form of Jumera Residential Block at Gurgaon which was not considered by the AO nor the same has been considered by ld. CIT (A) which is violation of principles of natural justice.

Undisputedly, assessee had one project at Jaipur and four land holdings at Shikhopur, Ullawas, Tigra and Maidawas all in Gurgaon. It is the case of the assessee that the project at Gurgaon is an extension of the project at Jaipur to give allotment for residential complexes to the buyers of shops in Jaipur project. The issue before the AO to be decided was, “as to whether the project at Gurgaon is an extension of Metropolitan project at Jaipur” and this question was decided by the AO in negative and taxed the profits of the sale of land whereas the assessee has reduced the sale consideration of land from work-in- progress and has not offered the profits for taxation.

When we examine the contention raised by the ld. AR for the assessee that the evidence brought on record by the assessee that Jumera Residential Block at Gurgaon was part of the integrated project has not been appreciated by the AO as well as ld. CIT (A) particularly the findings returned by the ld. CIT (A) in the impugned order on the issue in question, in para 4.2, it is apparent on record that sufficient opportunity to explain and adduce the evidence in support of its stand has not been given. It is recorded by ld. CIT (A) in the impugned order that the assessee has merely relied upon Board Resolution passed on various dates but ld. CIT (A) declined the contention of the assessee on the ground that the third party evidence to substantiate its contention that both the projects at Gurgaon and Jaipur are integrated one has not been led.

We are of the considered view that when assessee has categorically relied upon Board Resolution of the company to prove the fact that both the project at Gurgaon and Jaipur were integrated projects which certainly gets corroboration from the audited accounts, summarily dismissing the claim of assessee is certainly violation of rules of natural justice.

Ld. CIT (A) has not deliberated in any manner as to what would be the outcome of Board Resolutions relied upon by the assessee when examined in the light of the audited accounts. All these Board Resolutions are available at pages 8 to 10 of the paper book and audited financials are available at pages 11 to 20 of the paper book. Ld. CIT (A) was required to get the Board Resolutions examined in the light of the audited financials and the other circumstantial evidence during appellate proceedings but he has dismissed this argument of the assessee by merely recording the findings that no third party evidence has been brought on record by the assessee. All these facts go to prove that the issue is required to be examined afresh by the AO in the light of the Board Resolutions and audited financials of the company and the evidence available on record by providing adequate opportunity of being heard to the assessee. Consequently, impugned order passed by the ld. CIT (A) is set aside and the file is remanded back to the AO to decide afresh after providing adequate opportunity of being heard to the assessee.

Since initiation of penalty u/s 271(1)(c) of the Act is in consequence to the impugned order passed by the ld. CIT (A) now set aside, the penalty appeal u/s 271(1)(c) is also set aside to the AO to proceed in accordance with law after passing fresh assessment order on this issue, after providing adequate opportunity of being heard to the assessee. Consequently, the appeal is allowed for statistical purposes.

Resultantly, both the appeals filed by the assessee are allowed for statistical purposes. Order pronounced in open court on this 30th day of October, 2019.