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TMI Blog2012 (10) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the view that the project would be completed with deficit due to heavy charge of interest on the borrowings and due to non-availability of adequate buyers and therefore no income from it was offered - Held that:- Assessee has not brought out any tangible evidence in its support to justify its stand. Hence addition sustained. Dis-allowance of expenses pertaining to A.Y. 2001-02 but accounted for in the books relevant to AY 2002-03 - Held that:- Since details were not produced by the assessee before the AO or CIT(A). Issue be remitted to the file of A.O. for verification. Addition in respect of Shilalekh project - assessee has not offered any income on ground that project was consistently in deficit and therefore the assessee was not entitled to receive any remuneration or organising fee - Held that:- Since Tribunal in earlier year allowed claim of assessee on observation that assessee had no occasions to make any profit or earn any income from the project for the year under consideration. Thus this ground of the assessee is allowed. Addition made u/s 41(1) - Held that:- The undisputed fact is that the assessee has shown the amount as sundry creditors in its balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I ANIL CHATURVEDi, A.M. These are two cross appeals one filed by the Assessee and the other filed by the Revenue against the common order dated 29-3-2005 for the assessment year 2001-02. 2 Assessee is a company engaged in the business of construction of residential commercial complexes on contracts received against tenders on turnkey basis and on development basis under the terms of development agreements with various cooperative societies. It is also engaged in the manufacturing of hollow blocks and pavers in manufacturing unit located at Bopal on the outskirts of Ahmedabad. Assessee filed its return of income on 31.10.2001 declaring loss of Rs.3,12,24,880/-. The case was completed u/s 143(3) and after making various additions the total income was determined at Rs. 2,21,85,400/-. Aggrieved by the action of A.O. Assessee preferred appeal before CIT (A) where the assessee was granted partial relief. The assessee being aggrieved, is therefore now in appeal before us and has raised various greounds. 3 First ground is with respect to disallowance of bad debts in respect of Shail Project (Rs. 18,65,743), Shrusti plots Projects (Rs 50,98,891/-) and Shiromani Flats (Rs 1,28,06, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not going to be realized to the assessee company due to deficit in the project. Due to this reason total loss to the assessee works out to Rs.70,89,009/- (i.e. Rs.19,90,110/- + 50,90,891/-) out of this an amount of Rs.19,90,110/- is allowable as business loss under section 28 whereas Rs.50,90,891/- is allowable as bad debts or as business loss as this amount has been written off in this year but was subjected to tax in the earlier years. As regards disallowance of project deficit of Rs. 1,28,05,718/- in respect of the Shiromani Project it was submitted that the project deficit has been arrived at and claimed on the basis of the terms of development agreement entered into with the respective societies/NTCs. The terms of development agreements are more or less same as in the case of Shail Project and therefore the project deficit is not required to be reimbursed to the assessee company by the respective societies/NTCs. The detailed computation indicates overall surplus in the project before providing the remuneration works out to Rs.1,11,13,236/-.Against this surplus company has offered total remuneration for taxation in earlier years at Rs.2,39,19,954/- .Thus, Rs.1,28,06,718 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of CIT. He placed on record at page 338 to 342 the copy of the aforesaid order of ITAT. The Ld. A.R. then pointed out to the fact that the AO had relied upon the findings of the AO in order passed u/s 143(3) for AY 1999- 2000. CIT (A) had reversed the finding of the AO and the order of CIT (A) has been upheld by Hon ble ITAT in ITA No. 170/A/2003 dt 21.9.2007. It was thus contended that in view of the aforesaid facts the assessee s claim be allowed. The Ld. D.R. on the other hand relied on the order of the AO. 7. We have heard the rival contentions and perused the material on record. It is an undisputed fact that the AO while passing the order u/s 143(3) had relied on the order of CIT (A) for AY 1997-98 and the AO s finding for AY 1999-2000. Co-ordinate Bench of ITAT in ITA No 170/Ahd/2003 dated 21.9.2007 held as under: 25. Ground No.7 is regarding exclusion of income of Rs.87,90,686/- from the returned income. Brief facts are that the request of the assessee for exclusion of income of Shilalekh Project at Rs.1,07,49,031/- was denied by the A.O. vide para 3.7 of his order Assessee had shown development income by way of remuneration and organizing fee for Shilalekh projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. not only as per directions of the CIT contained in order u/s. 264 of the Act but after approval of CIT also. 9.2. The effect of the aforementioned letter is, therefore, nothing, but the fact that order giving effect on the basis of specific approval of the CIT and, therefore, was not an order of A.O. as envisaged in the provisions of Section 263 of the Act. 10. After having considered the facts and circumstances of the case and the aforesaid decisions relied upon by the Ld. Counsel for the assessee, which are direct on the issue, we are of the opinion that the CIT had no jurisdiction to invoke his powers vested u/s. 263 of the Act for revising the order passed by the A.O. on 31-5-2002 giving effect to the order of CIT passed u/s. 264 of the Act dated 22- 3-2002 as the same was passed after the approval of the CIT. 11. In view of the above discussion, we are of the opinion that the order of the CIT passed u/s. 263 of the Act on 18-3-2003 is not maintainable in law for want of jurisdiction and, therefore, the same is cancelled 12. Since we have cancelled the order passed u/s.263 of the Act on the basis of jurisdiction of the CIT u/s.263 of the Act to revise the orders p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D.R. on the other hand relied on the order of the AO. 13. We have heard the rival submissions and material on record. Before us the assessee has not brought out any tangible evidence in its support to justify its stand that it expects to incur loss in the project titled Sun-City and for not accounting for any income. The assessee has not submitted any detailed working duly supported by facts and figures and the compelling reasons along with the necessary supporting to justify its stand. In view of these facts, we are of the view that no interference is called for to the conclusion arrived by the A.O. In result this ground of the assessee is dismissed. 14. Gr. No. 3: Disallowance of expenses of Rs 62,47,845/- pertaining to A.Y. 2001-02 but accounted for in the books relevant to AY 2002-03. 15. On perusing the computation of income filed along with the revised return, the AO observed that assessee had sought deduction of Rs 72,17,922 for expenses debited in the financial accounts for the year ended 31.3.2002 but pertained to AY 2001-02. During the course of assessment proceedings the assessee informed the A.O. that it had erroneously claimed Rs 72,17,922/- instead of Rs 62,47,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shilalekh project: 18. Scrutiny of the details by the AO revealed that the assessee has not offered any income in respect of Shilalekh project. It was informed by the assessee that in accordance with the terms of development agreement, the project was consistently in deficit and therefore the assessee was not entitled to receive any remuneration or organising fee. The auditors of the assessee have also received deficit in the project and have qualified their report to the extent that the amounts shown receivable against the incomes offered are not likely to be realised in future. The assessee further submitted that considering the quantum of proposed addition which was to the extent of Rs 4,53,441/-, the assessee agreed to it at the time of assessment proceedings. The A.O. made the aforesaid addition for the reason that the assessee had himself admitted that the project is in surplus based on the query raised during AY 1997-98. CIT (A) also affirmed the action of the A.O. for the reason that the assessee himself offered the income for tax. Against the order of the CIT (A), the assessee is now in appeal before us. 19. At the outset, the Ld. A.R. submitted that similar issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 26. Ld. D.R. relied on the order of A.O. while Ld. Counsel for the assessee relied on the CIT (A) and contends that this issue was similar to ground No.4 in ITA No.167/Ahd/2003 and therefore, reiterates the same contentions made in A.Y. 1996-97, and the same be decided accordingly. 27. After hearing the rival submissions, we find that the issue involved in this ground No.4 in ITA No.167/Ahd/2003 in the case of the assessee. The facts and circumstances being identical, we following our order in the said appeal, dismiss this ground of appeal of the Revenue. 21. We find that the issue involved in the present ground is similar to that of ground no 7 of ITA No 170/Ahd/2003. Since the facts and issues involved in the present appeal are identical to that of A.Y. 1999-2000, we following the order of the co-ordinate Bench, allow the ground of the assessee. Thus this ground of the assessee is allowed. 22. Gr. No 5: not granting carry forward of speculative capital loss of Rs.1,44,69,500/-. 23. Before CIT (A) the assessee contended that the A.O. has not granted carry forward of speculative loss of Rs 1,44,69,500/- despite the fact that the assessee had filed its return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to exist. The A.O. has not doubted the existence of the parties. The Revenue does not have any material or evidence to substantiate that the parties have given up their claim against the assessee. These facts have not been controverted by the Revenue nor have they brought on record any material to the contrary. In view of these facts we do not find any infirmity in the order of CIT (A) and therefore affirm his action. In the result this ground of the Revenue is dismissed. 30. Gr. No 2: deletion of addition of Rs 53,85,475/- with regard to Rajiv Traders Pvt Ltd. 31. The assessee had written off Rs 53,85,475/- being the amount recoverable from Rajiv Traders Pvt Ltd (a company under the same management). The A.O. disallowed the claim on the ground that the assessee failed in giving justification for non recovery of amount and also for the reason that the assessee had not furnished documentary evidence to substantiate that the net worth of Rajiv traders was not capable to meet the liability. The assessee appealed before CIT (A). CIT (A) allowed the appeal of the assessee by holding as under: 5.2. I have carefully considered the facts of the case, findings of the A.O. in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of normal business activity of real estate development being carried out by the company. 34. The Ld. A.R. further submitted that the loss on sale of shares of Rajiv Traders P Ltd has been allowed as business loss by Hon ble ITAT in AY 1998-99 in ITA No 169/Ahd/2003. He placed on record at page 334 to 337 of paper book the copy of the order of Tribunal. He thus urged that in view of the facts, the CIT (A) has rightly deleted the addition made by the A.O. and the same be upheld. 35. We have heard the rival contentions and perused the material on record. The undisputed fact is that the assessee is engaged in the business real estate developers and civil contractors. A piece of land was owned by Rajiv Traders Pvt Ltd. The assessee for developing the said land acquired the entire share capital of Rajiv Traders Pvt Ltd. Subsequently, the said project was abandoned and disposed off by transferring the entire share holding of Rajeev traders. At the time of transfer of the project, the total amount receivable in the nature of work in progress comprising of construction cost and income accounted thereon was Rs. 1,13,85,474/-. The total construction expenses together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment of properties and real estate and as such any loss borne in the course of business is allowable is allowable as business loss. I find that appellant had offered interest income of Rs.4,95,899/- and Rs.3,93,750/- in A.Y. 1998-99 and A.Y. 1999-00.Writting off of these amounts in the books due to non-realization is certainly in the nature of bad debts and as such appellant is entitled to claim the same as bad debts. The A.O. is therefore directed to grant deduction of Rs.8,89,649/-.As regards remaining amount of Rs.1,76,004/- is concerned, I find that the same has arisen in the course of business of development of properties and real estate and as such is allowable as business loss. The A.O. is therefore, directed to grant deduction of Rs.1,76,004/- as business loss. In the result appellant gets relief of Rs.10,65,653/- against these grounds of appeal. 38. Aggrieved by the order of CIT (A), the Revenue is in appeal before us. 39. Ld. D.R. submitted that before A.O. the assessee did not furnish necessary evidence to prove that the amount was offered as income in earlier years. The assessee has not brought anything on record to justify its stand. With respect to the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully considered the facts of the case, findings of the A.O. in the assessment order, submissions of the appellant. I find that writing off of the non-recovered advances given in the course of business and for purpose of business cannot be said to be capital in nature, the same is squarely allowable as business loss. The A.O. is directed to grant deduction of the same. 43 Aggrieved by the decision of CIT (A), Revenue is in appeal before us. Before us, the Ld D.R. relied on the order of the A.O. On the other hand the ld. A.R. relied on the order of the CIT (A). He also placed on record at page 198 to 203 of the paper book the copy of ledger account. He urged that CIT (A) has rightly deleted the addition made. 44. We have heard the rival contention made and perused the material on record. The undisputed fact is that the assessee is also in the granite business. The amount was given as advance to the holders of granite mines from whom it used to purchase granites. The amount was advanced in the normal course of business. The amount of write offs were of the advances given in the normal course of business. The assessee had also made purchases from these parties in the past. These ..... X X X X Extracts X X X X X X X X Extracts X X X X
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