2015 (4) TMI 1216 - AT - Income Tax

Disallowance under Section 40A(3) - cost of the land as well as additional payment - expenditure not claimed - Held that - The issue as raised squarely covered by the order of the co-ordinate bench as reproduced in M/s. Glitz Builders (2015 (5) TMI 384 - ITAT DELHI ). We concur with the finding of the co-ordinate Bench that when the cost of the land as well as additional payment has not been claimed by the assessee as deduction, then the question of any disallowance under Section 40A(3) or otherwise in the case of the assessee does not arise. We, therefore, delete the entire disallowance made by the Assessing Officer under Section 40A(3) as well as additional payment. Respectfully following the precedent as aforesaid we allow grounds of the assessee for Assessment Year 2006-07 and dismiss the ground of revenue. Addition on account of Interest on PDCs paid out of books of account - Held that - The PDCs have been encashed within a period of six months as is apparent from page 11 of assessment order where A.O. has noted the date of sale of properties and date of encashment of cheques. Therefore, we find that the facts in the present case are similar in one of the Sister concern i.e. case of M/s IAG Promoters and Development Pvt. Ltd 2014 (12) TMI 216 - ITAT DELHI therefore, following the Tribunal order in the case of group company, we dismiss this appeal of Revenue. Disallowance an additional payments u/s 37 - main contention of the ld AR is that having not claimed the expenditure, the same cannot be disallowed - Held that - When the additional payment has not been claimed by the assessee as deduction, then the question of any disallowance. See M/s. Glitz Builders (2015 (5) TMI 384 - ITAT DELHI ) Addition made on account of interest on PDC - Held that - The ground of revenue is factually incorrect and it was only a direction of ld CIT(A) to AO to re-calculate the interest on PDC s on the basis of material seized during search and as per the direction the AO has found that there was no interest payable since the PDC were encashed before six months and we have already dismissed the appeal of the revenue on identical ground in earlier years, so on identical reason following the order of the Tribunal in M/s, IAG Promoters, we are inclined to dismiss this ground of the revenue.

Summary

Issues Involved:
1. Validity of notice issued under Section 153C of the Income Tax Act, 1961.
2. Disallowance of additional payments not claimed as deduction.
3. Disallowance under Section 40A(3) of the Income Tax Act, 1961.
4. Deletion of addition made under Section 37(1) of the Income Tax Act, 1961.
5. Deletion of addition on account of interest on Post Dated Cheques (PDCs) paid out of books of account.

Detailed Analysis:

1. Validity of Notice Issued Under Section 153C:
The assessee's appeal raised grounds regarding the validity of the notice issued under Section 153C of the Income Tax Act, 1961. However, these grounds were not pressed at the time of hearing and were subsequently rejected.

2. Disallowance of Additional Payments Not Claimed as Deduction:
The assessee contended that additional payments made were not claimed as deductions, thus no disallowance could be made. The Tribunal referenced a similar case, M/s Glitz Builders and Promoters Pvt. Ltd., where it was held that since the cost of land and additional payments were not claimed as deductions by the assessee, the question of disallowance under Section 40A(3) or otherwise did not arise. Following this precedent, the Tribunal deleted the entire disallowance made by the Assessing Officer under Section 40A(3) and additional payments.

3. Disallowance Under Section 40A(3):
The Tribunal found that the assessee had not claimed any deduction for the cost of land or additional payments. Therefore, the disallowance under Section 40A(3) was not justified. This decision was consistent with the Tribunal's earlier ruling in the case of M/s Glitz Builders and Promoters Pvt. Ltd.

4. Deletion of Addition Made Under Section 37(1):
The revenue's appeal contested the deletion of an addition made under Section 37(1) for additional payments in violation of the Stamp Duty Act, 1899. The Tribunal, referencing its earlier decision in the case of M/s Glitz Builders and Promoters Pvt. Ltd., upheld that no disallowance could be made if the expenditure was not claimed as a deduction by the assessee. Thus, the Tribunal dismissed the revenue's appeal on this ground.

5. Deletion of Addition on Account of Interest on PDCs:
The Assessing Officer had made additions on account of interest on PDCs issued for the purchase of land, calculated at 15% per annum from the date of issue to the date of encashment. The CIT(A) directed the AO to recompute the interest on PDCs after six months from the date of issue. The AO found that the PDCs were encashed within six months, leading to the deletion of the entire interest addition. The Tribunal upheld this decision, referencing a similar case involving a sister concern, M/s IAG Promoters and Developers Pvt. Ltd., where it was established that interest on PDCs should be recalculated if encashed within six months.

Conclusion:
The Tribunal allowed the assessee's appeals for the Assessment Years 2006-07 and 2007-08, deleting disallowances under Section 40A(3) and additional payments. The revenue's appeals were dismissed, upholding the CIT(A)'s deletion of additions under Section 37(1) and interest on PDCs. The Tribunal's decisions were consistent with precedents set in similar cases involving sister concerns.