Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Appellant by : Shri Hariom Tulsyan Respondent by : Shri A.Ramachandran Date of hearing : 24/11/2015 Date of pronouncement : 30/11/2015 ORDER PER N.K.BILLAIYA,AM:
ITA Nos.2567/Mum/2010 & 2580/Mum/12 are appeals by the assessee against two separate orders of the CIT(A)-20, Mumbai pertaining to Assessment Year 2006-07. relates to an addition made in the assessment and ITA No.2580/Mum/12 relates to the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) in respect of addition so made.
First we take up ITA No.2567/Mum/2010. The grievance of the assessee relates to the addition of Rs.79,71,370/- made by the Assessing Officer. The assessee has raised additional ground stating that the CIT(A)has erred in treating Rs.79,71,370/- as income under section 28(1) of the Act.
The assessee is a developer engaged in the business of development of land at Mira Road for lower middle class people. The return for the year was selected for scrutiny assessment. On going through the statement of accounts, the Assessing Officer noticed that under Schedule-E of the balance sheet the assessee has shown advances for booking flats in Phase-II at Rs.97,81,374/- which was at Rs.92,51,187/- as on 31/3/2005. The assessee was to furnish details of the said project. The assessee explained that the project was in the name “Lavesh Enclave” and it was informed that the said project has been shelved and the amount is standing as liability for booking made for the flats. The assessee was further asked to furnish complete details of the persons booking the flats with the date of booking and the amount respectively. The assessee explained that the amounts have not been refunded and are still due, the names and addresses of the persons were furnished. To verify the genuineness of the transaction the Assessing Officer issued summons under section 131 of the Act. However, only one person has confirmed of having advanced a sum of Rs.1.00 lac towards booking of flat. The other persons who had booked the flats, the Assessing Officer was of the opinion that significant part of the amount shown as liability is not repayable by the assessee. The Assessing Officer also did not accept the contention of the assessee that the bookings of the shelved project have been transferred to some other project. The Assessing Officer finally concluded by observing “therefore, I disallow an amount of Rs.79,71,374/- out of the above liability after giving discount for the confirmation received”. Support was drawn from the decision in the case of CIT vs. T.V. Sundaram Iyengar Sons, 222 ITR 344(SC).
Aggrieved by this, the assessee carried the matter before the CIT(A) and reiterated what has been stated during the course of the assessment proceedings. After considering the facts and the submissions, the CIT(A) was of the strong belief that the assessee has no intention to refund the money as the assessee has not adhered to the Police complaints and notices sent by the Lawyers. The CIT(A) further observed that the depositors could not enforce recovery as it is barred by limitation. Though the additions/disallowances made by Assessing Officer was not referred to any specific section of the Act, the CIT(A) upheld the addition treating the disallowance as income under section 28(1) of the Act. Aggrieved by this assessee is before us.
Ld. Counsel for the assessee vehemently submitted that the Assessing Officer has not made reference to any specific section of the Act, therefore, the assessee is not in a position to defend its case. It is the say of the Counsel that though the additions have been confirmed by the CIT(A) but obviously the CIT(A) has done the same under section 28(1) of the Act, which is against the facts of the case, therefore, the additions need to be deleted.
Per contra, Ld. DR strongly supported the findings of the Revenue authorities.
We have given thoughtful consideration to the orders of the authorities below. Undisputedly, the Assessing Officer at Para-5 on Page-2 of his order has mentioned that Rs.79,31,374/- is disallowed. We failed to understand how an amount, which is shown as liability, can be disallowed. We further find that though the Assessing Officer had made disallowance but there is no mention of any section of the Act. It is a settled proposition of law that taxing statute have to be strictly interpreted, which means that either a section is applicable or it is not applicable. There cannot be any assumption in respect of any section. As mentioned elsewhere, the Assessing Officer has not referred to any section. Assuming that the additions have been made under section 41(1) of the Act, treating the outstanding liability as remission or cessation, in our considered opinion merely because the period of limitation prescribed under the Limitation Act has expired would not amount to extinguishment of the debt. This has been well settled by the decision of the Hon’ble Supreme Court in the case of CIT vs. Sugauli Sugar Work P. Ltd., 236 ITR 518(SC). 7.1 It would not be out of place to mention that the builders and developers constructing flats are covered by the Maharashtra Ownership Flat Act, 1963, wherein under Section 5 of the Act, it has been mentioned that the promoters shall maintain separate account in bank for the advances or deposits taken and he hold the money for the purpose of which it was given. Section 8 of the said Act further provides that the promoter shall be liable to refund the amount with interest if he fails to give possession in accordance with the agreement of the flat. Thus, it can be safely concluded that the liability is not ceased to exist. The fact that there are FIRs lodged against the assessee, there are legal notices served upon the assessee show that the liability still exists.
7.2 The CIT(A) has upheld the addition treating the same as income under section 28(1) of the Act is also not correct as the same has been shown under the head liability in the balance sheet. The names and addresses of the persons have been furnished before the authorities. The genuineness of the transaction has never been doubted. The entire additions have been made merely on the fact that the liability is more than three years old and, therefore, barred by the Limitation Act. This cannot be a ground in the light of the ratio laid down by the Hon’ble Supreme Court in the case of Sugauli Sugar Works P. Ltd.(supra).
7.3 The decisions relied upon by the first appellate authority are not in consonance with the facts of the case in hand and are therefore, misplaced. For example, the decision in the case of Solid Containers vs. CIT, 308 ITR 417 (Bom) relates to waiver of loan under the consent terms which was transferred to P&L Account. There is no waiver of loan in the case in hand nor there is any consent term and also there is no transfer to P&L Account. Similarly, in the case of T.V.Sundaram Inyengar Sons(supra), deposits were received from the customers which were not claimed by them and, therefore, transferred to P&L Account. However, in the case in hand, the depositors have filed FIRs and have sent legal notices for the recovery of amount, therefore, the facts are different.
7.4 Considering the facts in totality, we do not find any justification in the findings of the first appellate authority. We accordingly set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of Rs.79,71,370/- 7.5 The appeal filed by the assessee is accordingly allowed.
The additions have been deleted by us in ITA No.2567/Mum/2010. “Sublato fundaments creditopus”, which means in a case the foundation is removed the superstructure falls. Since foundation i.e. quantum addition have been removed by us the superstructure i.e. penalty falls.
In the result, the appeals filed by the assessee are allowed.
Order pronounced in the open court on 30/11/2015.