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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The above captioned cross appeals one by the assessee and the other by the Revenue have been preferred against the order dated 28.07.2014 of the Commissioner of Income Tax (Appeals). First we take up assessee’s appeal bearing ITA No.6116/M/2014.
2 & ITA No.6208/M/2014 M/s. City Life Developers ITA No.6116/M/2014 The assessee in this appeal has taken the following grounds: “1. The Learned CIT(A) has grossly erred both in law as well as in facts in confirming the assessing of income by the Assessing Officer of Peace Heaven project on protective basis.
The Learned CIT(A) has further erred in not appreciating the facts that the Income of Peace Heaven project has been assessed in Assessment Year 2009-10. Therefore, assessing the said income again for Assessment Year 2010-11 on Protective Basis is completely unjustified and uncalled for.
The Learned CIT(A) has erred in confirming the disallowance of Rs.6,27,167/- which represents amount payable to Architect M/s Ajay wade & Associates out of his total bill of Rs.21,80,111/- therefore, disallowances of outstanding payment is completely unjustified.
4. The Learned CIT (A) has further erred in not appreciating the fact that the said outstanding payment of Rs.6,27,167/- represents expenses accrued and due during the year and paid subsequently, therefore disallowances of the same is completely unjustified.”
Ground Nos.1 & 2: 2. At the outset, the Ld. Counsel for the assessee has stated that the impugned additions which have been contested vide ground Nos.1 & 2 of the appeal were made on protective basis pursuant to order dated 25.04.2013 passed by the Ld. Commissioner of Income Tax. He has further stated that the said order dated 25.04.2013 passed under section 263 of the Act has been quashed by the Tribunal vide order dated 18.05.15 passed in ITA No.4498/M/13. In view of this, ground Nos.1 & 2 have become infructuous at this stage. In view of the above ground Nos.1 & 2 of the appeal are dismissed having become infructuous.
Ground Nos.3 & 4: 3. The Ld. A.R. of the assessee, bringing our attention to ground Nos.3 & 4 of the appeal has stated that the disallowance of Rs.6,27,167/- has been made by the AO on account of difference/mismatch of the figures in the accounts of 3 & ITA No.6208/M/2014 M/s. City Life Developers the assessee and the payee of the amount paid by the assessee to Mr. Ajay Wade. He has further stated that the assessee has been following the mercantile system of accounting whereas Mr. Ajay Wade, the payee, has been following the cash system of accounting. That the assessee had booked the said payment on accrual basis and TDS being deducted thereupon; whereas, since Mr. Ajay Wade has been following cash system of accounting the said amount was not shown in his accounts as receipts. The Assessing Officer (hereinafter referred to as the AO) therefore disallowed the difference of Rs.6,27,167/-. The Ld. Counsel for the assessee has also filed an application for additional evidence as per rule 29 of the Income Tax Appellate Tribunal Rules, 1963 stating that the assessee has now obtained confirmation of accounts from Mr. Ajay Wade and that the alleged difference of amount has already been paid by the assessee to Mr. Ajay Wade during the next financial year.
We have gone through the copy of the confirmations filed but we note that the same were not enough and sufficient evidence to prove the actual payment of the said amount by the assessee to Mr. Ajay Wade. However, considering the interest of justice, we restore this issue to the file of the AO to decide it afresh. The AO will verify the accounts of the assessee as well as of Mr. Ajay Wade and thereafter to decide the issue afresh in accordance with law. Ground Nos.3 & 4 are therefore treated as allowed for statistical purposes.
In view of this, the assessee’s appeal is treated as partly allowed for statistical purposes.
Now coming to the Revenue’s appeal.
The Revenue in its appeal has taken the following grounds of appeal: “(I) On the facts and in the circumstances of the case, and in law, the Ld.
4 & ITA No.6208/M/2014 M/s. City Life Developers CIT(A) erred in allowing the additional depreciation of Rs.1,74,97,618/- without considering that as per sec 32(1)(iia) of the Act the words "in the business of generation or generation and distribution of power" were inserted by Finance Act 2012 i.e. the assessee is eligible for additional depreciation on windmill only from 01.04.2013." (ii) On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing the claim of deduction u/s 80IB(10) of the I.T.Act,1961of Rs 7,79,043/- despite the fact that the assessee do not fulfill the conditions prescribed in this section. (iii) On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in not considering the fact that the Commencement Certificate for the project was issued in the name of M/s Dhruv Construction to develop Wings A, B & C under a common approval.
(iv) On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in not considering that the joint venture entered into by the assessee in respect to Wing C is an afterthought to segregate the 3 Wings into two firms.
(v) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) further erred in not considering that in the approved plan before 1.4.2004, the construction of any commercial unit was not permitted whereas the Wing A & B consisted of shops.
(vi) On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the deduction u/s 80IB without considering that some of the flats were sold to relatives and some faults have been amalgamated into one flat exceeding the maximum permissible area, i.e. 1000 sq. ft. thereby violating the conditions required for deduction u/s.80IB( 10).
(vii) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.95,203/- u/s 69C of the I.T. Act as unexplained expenditure made by the AO.
(viii) On the facts and in the circumstances of the case and in law , the Ld CIT(A) erred in not appreciating the fact that the alleged purchase bills were not supported by the supply of goods.
(ix) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not appreciating the fact that the notices under 133 issued to the parties from whom alleged bills were received were returned undelivered by the postal authorities and ward Inspector and the assessee has also failed to produce the party before the AO.
(x) On the facts and in the circumstances of the case, and in law, the ld. CIT(A) erred in not considering that the assessee tried to camouflage the non-genuine transactions as genuine to introduce the unexplained (xi) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made by the AO overlooking the statement given by the parties and explicit finding of the investigation carried out by the Sales Tax Department and corroborated by the enquiries of the AO.
(xii) The appellant prays that the order of the ld.CIT(A) on the above grounds be set aside and that of the AO be restored.
(xiii) The appellant craves leave to amend or alter any ground or add a new ground."
Ground No.(i) 8. The ground No.(i) of the appeal is relating to the issue regarding the allowability of additional depreciation on wind mill. At the outset, the Ld. Counsel for the assessee has submitted that the issue is squarely covered by the decision of the Hon’ble Delhi High Court in the case of “NTPC Ltd. vs. DCIT” 2012 54 SOT 177 wherein the Hon’ble Delhi High Court has held that the process of generation of electricity is akin to manufacture or production of article or thing and that an assessee engaged in the activity of generation of electricity would be entitled to additional depreciation under section 32(1).
The Ld. D.R. could not point out any differentiating case law against the above stated proposition of law laid down by the Hon’ble Delhi High Court. In view of this, we do not find any force in ground No.I of the appeal and the same is accordingly dismissed.
Ground Nos.(ii) to (vi): 10. The Ld. Counsel for the assessee bringing our attention to ground Nos.(ii) to (vi) of the appeal has stated that the same relate to the disallowance made by the AO under section 80IB(10) of the Act. The AO observed that the assessee had not complied with the eligibility requirements as prescribed under section 80IB(10) of the Act. The Ld. Counsel has further invited our attention
6 & ITA No.6208/M/2014 M/s. City Life Developers to para 8 of the impugned order of the Ld. CIT(A) wherein the issue has been discussed. The relevant part of the observations of the Ld. CIT(A) on the above issue is reproduced as under:
“8. The next ground of appeal pertains to disallowance of deduction u/s.80IB(10). The facts of the case are that the appellant has been claiming the said deduction since AY 2004-05 in the following manner:
Assessment year As per IT return filed deduction u/s.80IB(10) 2004-05 1,98,188 2005-06 16,37,250 2006-07 7,36,978 2007-08 41,03,254 2008-09 567,96,889 2009-10 Nil 2010-11 7,79,043
The AO however has not allowed the said deduction on the grounds that original the commencement certificate was issued in the name of M/s.Dhruv Construction to develop Wings 'A"B & 'C'. The said approval was consolidated approval under common approval No.CHE/1078/LOP Wing 'A' and 'B' were developed by the said Dhruv Construction. However in respect of wing 'C' assessee M/s. City Developers entered into a joint venture dated 18-11-2003 and became a joint developer along with M/s.Dhruv Construction on the terms and conditions specified therein. On perusal of the said agreement it is seen that certain clauses of the agreement are still blank e.g. clause No.16. Even clause No.3 clearly states that all the 3 properties were amalgamated and layout was approved under No.CHE/1078/LOP dated 01-01-2003 and layout conditions were put up by MCGM under the ref. No.BDR-8/5639/2002 dated 16-10-2002 said clause No.3 is self speaking proof of common approval bearing No.CHE/1078/Lop dated 07-01- 2003. In the view of the same it is clear that the joint venture agreement is after device by the assessee so as to segregate three wings into two firms as stated above. In the view of the above of the basic conditions of deduction u/s.80IB(10) is not satisfied because the project was composite, joint and single. By merely breaking the project into various parts does not make the same eligible for deduction as claimed by the assessee.
It is further seen from the details filed that a certificate from Govt. licensed Surveyor Shri R.B.Nevase dated 19-11-2007 confirms that wing a & B consisted of 9 shops and approximately built-up area 1773.8 sq.ft. whereas statement recorded on oath from Shri Vijay Goradia on 14-11-
7 & ITA No.6208/M/2014 M/s. City Life Developers 2006 reveals that he has totally denied construction of any shop in the building (Q.No.9 to 12 of the statement). Since the project consisted of shop in wings A & B the whole project consisted of wings A,B & C automatically become ineligible for deduction u/s.801B(10) because in the approved plan before 01-04-2004 the construction of any commercial unit was not permitted. The combined effect of the above is that the assessee wrongly claimed deduction u/s.80IB(10) on both counts. Moreover, it is also seen from the details of flats constructed in wing C the areas of the flat as per BMC approved plan also substantiate the fact the assessee has sold the following flats to person who are relative.
Flat No. Name of the purchaser 702/802 Urmila Ladha- CAN & Aniket Ladha 1101/1102 Ali Z Mistry & Mrs. Fasha Mistry 1501/1502 Mr. Alwin Martis & Mrs. Cecelia Martis 1603/1604 Deena Modi - CAN & Renu Modi Can 1801/1802 Dr. Jeet N Yadav & Gyanti yadav 1803/1903/1904 Ravikant Poddar & Vinod Kumar Dharmendra V Poddar The above details also prove that the assessee has merely broken larger flats into two units so as to fall within the permitted area of 1000 sq.ft. and 462 sqJt.(carpet) respectively. It is nothing but adjoining common flats with common amenities like kitchen etc. Only for the purpose of registration it is divided into parts so that the area does not exceed 1000 sq.ft. Similarly flat No.702 & 802 are just one above the other and accordingly for the purpose of deduction is considered as one units as held in the case of K.G. Vyas 16 ITD 195 (Mumbai Tribunal) and 107 ITRD 321 (Mumbai Tribunal). On these counts also the contention of the assessee that the adjoining flats are separate units does not hold good as per the judgment of Mumbai Tribunal. Accordingly the claim of deduction u/s.80IB(10) on the ground of excessive area constructed in respect of residential unit is also violated and therefore disallowed. The AO has made the addition as in the earlier years.
I have gone through the contention of the AO and I find that after detailed reasoning my predecessor has allowed the said deduction to the appellant. The Hon. ITAT, Mumbai in the appellant's own case has allowed relief to the appellant for AY 2004-05, 2005-06 and 2006-07 by upholding the decision of CIT(A). Respectfully following the decision of Hon Tribunal in the appellant's own case on this issue this ground of appeal is allowed.”
11. A perusal of the above part of the impugned order reveals that the Ld. CIT(A) has allowed the claim of the assessee following the decision of the Tribunal in the own case of the assessee for A.Y. 2004-05, 2005-06 & 2006- 07. Since the issue is squarely covered by the decision of the Tribunal in the own case of the assessee and no differentiating fact has been brought into our
8 & ITA No.6208/M/2014 M/s. City Life Developers knowledge for the year under consideration, hence ground Nos.(ii) to (vi) of the Revenue’s appeal are hereby dismissed. Ground Nos.(vii) to (xi): 12. The Ld. Counsel for the assessee, bringing our attention to ground No.(vii) to (xi) as reproduced above, has stated that the same relate to the disallowance of bogus purchases of Rs.95,203/-. He has further stated that during the year the AO had made the addition of the aforesaid amount of Rs.95,203/- in relation to the purchases made by the assessee from Mahavir Traders because of the reason that the name of the said trader appeared in the list of the Hawala Traders as published on the website of the Sales Tax Department. However, the Ld. CIT(A) deleted the addition so made by the AO observing that the AO had not made independent enquiries and that the purchases cannot be held as bogus merely on the basis of third party statement; That the payments were made through banking channel and the corresponding bills and invoices were also produced and even the confirmation of the accounts was also filed from Mahavir Traders along with PAN number.
Before us, the Ld. D.R. has relied upon the findings of the AO and has stated that since as per the Sales Tax Department the said trader was indulged in bogus billing, hence the additions have rightly been made by the AO.
On the other hand, the Ld. Counsel for the assessee has relied upon the findings of the Ld. CIT(A) and has submitted that in the light of various case laws on this issue the additions so made by the AO have rightly been deleted by the Ld. CIT(A) relating to this issue. He has brought our attention to the decision of the Hon’ble Gujarat High Court in the case of “CIT vs. M.K. Brothers” (1987) 163 ITR 249 wherein it has been held that where there was nothing to indicate that the amount given by the assessee for the purchases made had come back to the assessee in any other form and where there was no evidence that the said concerns gave bogus vouchers to the assessee and even the statements made by the alleged suppliers in no way implicate the 9 & ITA No.6208/M/2014 M/s. City Life Developers transaction with the assessee then under such circumstances it cannot be said that entries for the purchase of goods made in the books of account of the assessee were bogus and no addition in this respect can be made. The Ld. Counsel for the assessee has further relied upon the decision of the Hon’ble Bombay High Court in the case of “CIT vs. Nikunj Enterprises (P.) Ltd.” (2013) 35 taxman.com 384 (Bombay) wherein the Hon’ble Bombay High Court has upheld the findings of the tribunal that where the assessee filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through account payee cheques to suppliers and stock reconciliation statements, sale of purchased goods was not doubted, the transactions were supported with evidences and confirmations, in such an event merely because the suppliers have not appeared before the AO or the Ld. CIT(A), one can not conclude that the purchases were not genuine.
In the light of above stated legal position, we do not find infirmity in the order of Ld. CIT(A) while deleting the additions made by the AO on account of bogus purchases under section 69C of the Act.
Ground Nos.(xii) & (xiii) are general in nature and do not require any adjudication. In view of the above, the appeal of the Revenue is dismissed.
In the result, the appeal of the assessee is treated as partly allowed whereas the Revenue’s appeal is dismissed.
Order pronounced in the open court on 03.04.2017.