2019 (1) TMI 143 - AT - Income Tax

Addition on account of the cost of the project overruled - according to the revenue is nothing but to claim excessive WIP and the assessee had made it a colourable device to increase the WIP of the project by routing of advance without any substance - interest free advances given to the assesseeb y 2 persons - CIT(A) had deleted the additions by holding that AO had not brought any evidence to substantiate that the value of shares at Rs. 14.25 crores was under value and also found force in the transactions between the two creditors and the assessee for allowing to allot 80, 00 Sqft. ready saleable area in lieu of advance of Rs. 3 crores. Held that - CIT(A) while deciding this ground had only taken into consideration that assessee had given right to construct an area of 80, 000 Sqft but has not considered at all the investment agreement where the assessee had allowed to allot premises of 80, 000 Sqft ready saleable area for occupation on the ownership basis . Therefore in this manner the Ld. CIT(A) has not considered the documents and the facts in right perspective and deleted the additions. As in the case of Kapurchand Shrimal Vrs. CIT 1981 (8) TMI 2 - SUPREME COURT has held that the duty of the Tribunal does not end with making a declaration that the assessments are illegal and it is duty bound to issue further directions. The appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue if necessary appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute and the statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. Therefore we remit the matter back to the file of AO with a direction to carry further investigation/verification if so required and to remove the doubts /suspicion if any and to pass afresh order - Appeal filed by the revenue is partly allowed for statistical purposes. Disallowance of Legal & Professional Charges - allowable business expenditure - Held that - After verification with the actual bills received and on verification it was noted that the purpose mentioned by the assessee tabulated earlier was not fully true. CIT(A) after verifying had also given instances which are based on factual findings and for reference the bill of M/s Mulla & Mulla & Crigie & Caroe dated 31.12.2010 mentions that it is in respect of advising in respect of proposed agreements between Sigtia Constructions Pvt. Ltd. and Lalita Vinod Sigtia and Nikhil Sigtia and Sudhakar Shetty / Sahana Constructions Pvt. Ltd. The bill was in respect of general advising from time to time. Similarly the bill dated 31.12.2010 of Parekh & Co. Delhi was in respect of conferences of the Advocates with Advocates of Mulla and Mulla for finalizing the Share Purchase Agreement and the Investment Agreement. Similar was the purpose in the bills of Rs. 24, 50, 000/- of Pravin Parekh dated 7.01.2011. As specifically pointed out that the other bills was in respect of various Writ Petitions. By appreciating the factual aspects contained in the present case we are also of the view that the sale of shares and management by the promoters of the assessee company cannot be termed as business of the company. - Decided against assessee. Addition under the head prior period expenses - Held that - CIT(A) after appreciating the facts had correctly noticed that the expenses claimed were not raised in the return of income and moreover no details were available. No new facts have been brought on record in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore there are no reasons for us to interfere into or deviate from the findings so recorded by the Ld.CIT(A). - Decided against assessee.

Issues Involved:
1. Deletion of disallowance of Rs. 3 crore as unexplained cash credit under Section 68 of the I.T. Act.
2. Disallowance of legal and professional charges amounting to Rs. 60,22,000.
3. Non-consideration of expenses of Rs. 36,000 shown under the head prior period expenses.

Issue-Wise Detailed Analysis:

1. Deletion of Disallowance of Rs. 3 Crore as Unexplained Cash Credit:
The revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)] in deleting the disallowance made by the Assessing Officer (AO) on account of the cost of the project being overruled at Rs. 14.25 crores. The AO observed that two individuals had given interest-free advances of Rs. 3 crore to the assessee, who were former directors and shareholders. The AO questioned the genuineness of these transactions and added the amount back to the income of the assessee as unexplained cash credit under Section 68. The CIT(A) deleted this addition, stating that the identity and sources of the advance were not in doubt and that any undervaluation should be taxed in the hands of the recipients, not the assessee. The Tribunal found that the CIT(A) had not considered the AO's findings correctly and remitted the matter back to the AO for further investigation and verification, directing the AO to pass a fresh order after providing an opportunity for hearing to the assessee.

2. Disallowance of Legal and Professional Charges Amounting to Rs. 60,22,000:
The assessee challenged the CIT(A)'s order in confirming the disallowance of legal and professional charges amounting to Rs. 60,22,000. The CIT(A) found that the legal expenses were partly related to the sale of shares by the promoters and the change of management, which should not be considered as business expenses of the assessee. The Tribunal upheld the CIT(A)'s decision, agreeing that these expenses were not incurred for the business of the assessee and should have been borne by the promoters in their personal capacity. The Tribunal found no new facts to rebut the CIT(A)'s findings and dismissed this ground of appeal.

3. Non-Consideration of Expenses of Rs. 36,000 Shown Under the Head Prior Period Expenses:
The assessee also contested the CIT(A)'s decision in not considering the expenses of Rs. 36,000 shown under the head prior period expenses. The CIT(A) noted that these expenses were not claimed in the return of income and no details were available to support the claim. The Tribunal agreed with the CIT(A)'s findings, noting that no new facts were presented to counter the decision. The Tribunal dismissed this ground of appeal as well.

Conclusion:
The Tribunal partly allowed the revenue's appeal for statistical purposes by remitting the issue of Rs. 3 crore back to the AO for further investigation. The assessee's appeal was dismissed in its entirety, upholding the disallowance of legal and professional charges and the non-consideration of prior period expenses. The Tribunal emphasized the need for thorough inquiry and proper documentation in the assessment process.

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