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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 ..... 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 1,28,06,718/-): 4 On scrutiny of the work in progress offered for each of the projects, the AO observed that the assessee had claimed project deficits generated in three projects namely Shail, Shrusti and Shiromani. The assessee was asked to show cause as to why the project deficits not be disallowed. The assessee submitted his explanation as under:- In respect of development projects, assessee had offered incomes on yearly basis without actually working out as to whether the project is generating profits or losses. It was the policy of the assessee to offer all surplus in the projects upto completion for taxation and claim the deficits as loss. This has been the consistent accounting policy of assessee and the same has been accepted by Department in the past. In view of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/-(i.e. Rs.2,39,19,954/- less Rs.1,11,13,236/-) which has been offered in earlier years as income without earning the same from the project, is not going to be realized to the assessee company. Due to this reason this amount of Rs.1,28,06,718/- has been claimed as net project deficit which is nothing but is in the nature of bad debts because this amount was subjected to tax in earlier years but has now become unrealizable. 5.. The AO held that facts in the case in the present year with respect to Shail, Shrusti and Shiromani projects were similar to the issue with respect to Shilalekh project in AY 1999-2000. Following the earlier year's order, the AO held that the claim of bad debts (Rs 18,65,743/- of Shail project), (Rs 50,98,891 of Shrusti project) and (Rs 1,28,06,718/- of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A 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 project in the books as well as in the return of income, but claimed in the assessment proceedings that this income was hypothetical income not liable to be taxed. A.O. was not satisfied of the replies of the assessee and taxed the income in the hands of the assessee. In appeal, CIT (A) after considering the remand report of the A.O. revision order passed under Section 264 by CIT-II, Ahmedabad, order giving effect to revision order by the A.O. viewed that Shilalekh Project was in deficit upto 31-3-2001, and therefore, assessee had no occasions to make any profit or earn any income from the project for the year under consideration. The CIT-II, Ahmedabad has examined this issue in revision proceedings and held that income credited in the books of accounts are hypothetical in nature for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 passed as per directions or approval; by the CIT, we do not consider it necessary, at this stage, to consider the issues raised on merits." 9. In the present case, the A.O. in the assessment order has given a finding that the facts in the present assessment years are similar to the facts of A.Y. 1999-2000. The A.O. while passing order u/s. 143(3) has followed the order of CIT passed u/s.263 for A.Y. 1997-98. The co-ordinate Bench of ITAT has allowed the appeal of A.Y. 1999-2000. These facts have not been controverted by Ld. D.R. nor have they brought any material to the contrary on record. In view of these facts and following the decision of co-ordinate Bench for A.Y. 1999-2000, we allow this ground of the assessee. Gr. No. 2: addition of Rs 29,36,700 in respect of Sun City Projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 62,47,845/- and therefore its claim be restricted to Rs 62,47,845/-. The assessee was asked to produce the details of expenditure and proof of payment. In the absence of satisfactory explanation the A.O. concluded that the assessee could not substantiate its claim and the assessee had simply made provisions in the books of accounts. He accordingly disallowed the expenditure claimed. Aggrieved by the decision of AO, the assessee preferred appeal before CIT (A). CIT (A) upheld the action of the AO. On the alternate plea of the assessee before CIT(A) that, if the claim of the assessee is not considered in AY 2001-02, then the AO be directed to consider the claim of the assessee in AY 2002- 03, CIT(A) directed that the A.O. may consider the claim in AY 2002-03 after proper verification and satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid 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 in the assessee's own case have been decided in assessee's favour by Hon'ble ITAT in ITA Nos 167, 169 and 170/Ahd/003 for AY 1996-97 to AY 1999- 2000. He placed on record the copies of the aforesaid orders (at page 315- 323, 324-333 * 338-342). He thus urged that following the earlier orders of co-ordinate Bench. This ground of appeal be allowed. On the other hand the Ld. D. R. did not seriously object to it. 20. We have heard the rival contentions and perused the material on record. The factual position is that the A.O. did not accept the contention of the assessee that the project was still in deficit because the assessee had admitted in the letter submitted to DCIT for AY 1997-98 that if the interest is reallocated without considering the remuneration on the project, the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 within the time stipulated under the provisions of section 139(1) of the Act. CIT (A) directed the A.O. to go through the claim of the assessee and take action as per law. 24. Before us it was contended by the Ld. A.R. that the A.O. is yet to give effect to the order of CIT (A). He therefore urged that suitable directions be given to the AO. The Ld. D.R. did not seriously object to the contentions of the A.R. 25. We have heard the rival contentions and perused the material on record. From the order of CIT (A) it is seen that CIT (A) directed the A.O. to verify the claim of the assessee and deal as per the provisions of Act. It appears that the directions have yet to be complied with. We therefore direct the A.O. to verify the facts and if the directions of CIT (A) have not been comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication 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 assessment order, submissions of the appellant and authorities relied upon. I find that Suryamani Project was undertaken in the normal course of business of development of properties and real estate and as such any loss borne in the course of business is allowable as business loss. I find that decision relied upon are squarely applicable on the facts of the case. Under these circumstances, I have no option but to grant deduction of Rs.53,85,474/- as business loss. The appellant succeeds in this ground of appeal. The A.O. is directed to delete the disallowance so made." 32. Aggrieved by the order of the CIT (A), the Revenue is now in appeal before us. 33. Before us, the Ld. D.R. relied on the order of the AO. On the other hand, the Ld. A.R. submitted that the facts are that one land was owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire 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 with remuneration added was offered as work in progress and credited to propfit and loss account and was thus offered to tax. Against this amount, only Rs 60,00,000/- was realised and the balance amount of Rs 53,85,475/- was written off. The Coordinate Bench of tribunal has also allowed the loss on sale of shares as business loss while deciding the appeal for AY 1998-99. These facts have not been controverted by the Revenue nor have they brought any material on record to rebut it. In view of these circumstances, we are of the considered view that no interference is called for to the order of CIT (A). We accordingly uphold his order and therefore this ground of the Revenue is dismissed. Gr. No 3: claim of bad debts of Rs 495899/- and business loss of Rs 1,76,004/-. Gr. No 4 : additional ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets 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 claim of Rs 3,93,750/- made before CIT(A), it was submitted that the claim was made first time before the CIT(A). No such claim has been made before A.O. It was therefore urged that the relief granted by CIT (A) be quashed. In the alternate it was submitted that the matter be sent back to the file of A.O. for verification. The Ld. A.R. did not object to the plea of sending the matter to the file of A.O. for verification. 40. We have heard the rival contentions and perused the material on record. It is an undisputed fact that the assessee's claim was not allowed by the A.O. for the reason that the assessee did not adduce necessary evidence to prove that the amount that was being written was in the past offered to tax. Even the additional claim was made before the CIT (A) for the first time and the A.O. did ..... X X X X Extracts X X X X X X X X Extracts X X X X
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