2017 (11) TMI 1132 - AT - Income Tax

Disallowance on account of additional payment made for the purchase of land - as per assessee he has not claimed the expenses made categorized as Additional payment as a deduction either by debiting to Profit and Loss account or through computation and therefore Assessing Officer was not justified in disallowing the same - Held that - The assessee has also either acted as a land holding company purchasing land and transferring the development rights in respect of land purchased to BPTOP Ltd. or accumulating development rights in respect of land purchased by other group companies and transferring these land development rights to BPTOP Ltd. To that extent, the facts of case of assessee company are similar and identical to the facts of other cases which are decided by various coordinate benches of Tribunal, New Delhi on which reliance is placed by the learned AR of the assessee. There is nothing on record that Additional payment is not recorded in books of account and we are unable to find any mention by the Assessing Officer in assessment order or by the learned CIT (Appeals) in his order. Accordingly, the argument of the learned CIT DR that Additional payment is not recorded in books of accounts is not factually correct. As facts of case of assessee are similar and identical to the various cases decided by coordinate benches of Tribunal, New Delhi where similar disallowance has been deleted by the Tribunal in other group cases cited by the assessee. Being bound by the decision of the Coordinate Bench, it is held that no disallowance of additional payment can be made. In the result, it is held that the learned CIT (Appeals) was not justified in upholding part of the disallowance of additional payment on the ground that neither the assessee has debited additional payment in its Profit & Loss account nor has claimed it. - Decided in favour of assessee. Disallowance of cash payment made under section 40A(3) is deleted as assessee has not claimed any deduction in respect of cash payment made. Assessment u/s 153A - Held that - Validity of notice was not upheld on the ground that satisfaction note was silent about the assessment year in which incriminating information was discovered on search. See CIT vs Singhad Technical Education Society 2015 (4) TMI 190 - BOMBAY HIGH COURT . As the Assessing Officer has failed to record the said documents in the satisfaction note and in our considered view, the Assessing Officer cannot go beyond the documents referred in the satisfaction note. Accordingly on this reason alone, this document could not be considered for assessment under section 153-C and the above document cannot be used in the assessment made u/s. 153-C, therefore, the addition of ₹ 9 lacs is not warranted and is hereby deleted. - Decided in favour of assessee.

Issues Involved:

1. Assumption of jurisdiction by the Assessing Officer under section 153C.
2. Addition on account of interest on Post Dated Cheques (PDCs) paid outside the books of account.
3. Disallowance of additional payments for the purchase of land.
4. Disallowance under section 40A(3) for cash payments.
5. Addition based on a document not mentioned in the satisfaction note.

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction by the Assessing Officer under Section 153C:

The assessee challenged the jurisdiction assumed by the Assessing Officer (AO) under section 153C, arguing that the satisfaction note was not recorded by the AO of the searched person (M/s BPTP Ltd) but by the AO of the assessee. The Revenue countered that since the AO of both entities was the same, there was no infirmity. The Tribunal accepted the Revenue's contention, noting that the satisfaction note was valid as per the judgment in Ganpati Fincap Services Pvt. Ltd vs. CIT. Consequently, the ground was rejected.

2. Addition on Account of Interest on PDCs Paid Outside the Books of Account:

The AO added ?1,72,42,433/- (later rectified to ?77,36,402/-) as interest on PDCs paid outside the books based on seized documents. The CIT(A) directed a recomputation of interest, which led to the deletion of the entire addition. The Tribunal upheld the CIT(A)'s order, following the precedent set in the case of M/s IAG Promoters and Developers Pvt. Ltd., where similar facts and documents were involved. The Tribunal emphasized judicial discipline and consistency, rejecting the Revenue's ground.

3. Disallowance of Additional Payments for the Purchase of Land:

The AO disallowed ?2,59,24,132/- as additional payments for land purchase, alleging it was to avoid correct stamp duty. The CIT(A) allowed part of the payment made by cheque to landowners but disallowed payments made in cash or to non-owners. The Tribunal found that no deduction for additional payments was claimed by the assessee, similar to the case of M/s Westland Developers Pvt. Ltd., and deleted the entire disallowance. The Tribunal rejected the Revenue's ground, noting that the facts were identical to previously decided cases.

4. Disallowance under Section 40A(3) for Cash Payments:

The AO disallowed ?32,28,037/- under section 40A(3) for cash payments for land acquisition. The CIT(A) upheld the disallowance. The Tribunal, referencing the case of Westland Developers Pvt. Ltd., held that since the assessee did not claim these expenses as deductions, the disallowance under section 40A(3) was not warranted. The Tribunal allowed the assessee's ground and deleted the disallowance.

5. Addition Based on a Document Not Mentioned in the Satisfaction Note:

The assessee objected to an addition of ?9 lakhs based on a document not listed in the satisfaction note. The Tribunal agreed with the assessee, citing the principle that the AO cannot use documents not mentioned in the satisfaction note for assessments under section 153C. The Tribunal referenced the case of CIT vs Singhad Technical Education Society, affirmed by the Supreme Court, to support its decision. Consequently, the addition was deleted.

Conclusion:

The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed. The Tribunal's decision emphasized the importance of judicial consistency, proper recording of satisfaction notes, and adherence to principles established in previous judgments.

← Previous Next →