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TMI Blog2022 (2) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... sets, addition of closing balance in the Customers Advances Account, addition on account of expenses incurred during the year and capitalized to work-in-progress - HELD THAT:- As the additions under sections 68 and 69C of the Act can be made provided the transaction takes place during the previous year / financial year. Further, for making addition under section 68 of the Act, the assessee must fail to offer explanation and for making addition under section 69C of the Act, the source of the expenditure must remain unproved. In the present case, the assessee had duly explained the sources of the credit and the expenditure, respectively. As apparent that the transactions pertaining to the additions made by the Assessing Officer, i.e in respect of advances from customers and in respect of opening inventory (WIP)] did not pertain to the previous year relevant to A.Y. 2012-13, but the same are related to the previous year relevant to A.Y. 2011-12. Therefore, these additions are not in accordance with the provisions of Sections 68 and 69C of the Act. We are not satisfied about the correctness of the additions made by the Assessing Officer and confirmed by the ld. CIT(A) in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be after the date of the passing of the order of the ld. CIT(A). The hearing was refixed for the said purpose, during the course of which, the assessee filed its clarification vide submission dated 7.7.2021. It was submitted that the assessee has duly replied to the observations of the ld. CIT(A) in respect of the second remand report, vide its earlier submission dated 16.12.2019. As regards letter dated 10.12.2018, it was submitted that the orders passed by the ld. CIT(A) in this group of cases on 27.11.2018, 28.11.2018 and 14.12.2018 were all served on 14.12.2018/24.12.2018 and hence on 10.12.2018, the assessee was not aware of the order of ld. CIT(A). It was submitted that in any case, the contents of the letter dated 10-12-2018 were already available with the A.O. and the ld. CIT(A), vide earlier communications and as such, there is nothing new which has been submitted in the above-said letter. 3. All the assessees have taken the following common Additional Ground: 1. The ld. CIT(A) ought to have held that the additions made by the Assessing Officer are beyond the jurisdiction of CASS , the assessment scrutiny proceedings and hence illegal and bad in law. 4. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of want of jurisdiction. In any case, the assessee has filed a letter stating that it does not want to press the Additional Ground of appeal. The Additional Ground of Appeal is, accordingly, rejected. 8. Now we take up the original grounds of appeal taken by the assessees. The issue being common in all the appeals, for the sake of convenience, facts are being taken from ITA No.24/LKW/2019, wherein, the assessee is Sahara City Homes, Bareily. The concise Grounds of Appeal taken by the assessee are as follows: 1. The learned CIT (A) has erred in law and on facts in confirming the addition of ₹ 9,12,631/- on account of capital expenditure incurred / during the year for purchase of fixed asset made during the year. 2. The learned CIT (A) has erred in law and on facts in confirming the addition of ₹ 36,96,539/- under section 68 on account of closing balance in customer advances account. 3. The learned CIT (A) has erred in law and on facts in confirming the addition of ₹ 5,42,86,466/- under section 69C of the Act on account of expenses incurred during the year which were capitalized to WIP. 4. The learned CIT (A) has erred in law and on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, during the year under consideration, the assessee had also spent an amount of ₹ 5,42,86,466/- towards WIP, as reflected in the assessee s financials for the year under consideration. Disbelieving this transaction, the Assessing Officer made an addition of ₹ 5,42,86,466/-, under section 69C of the Act, which was confirmed by the ld. CIT(A). This forms the basis of Ground no.3 before us. 13. At the time of formation of the Partnership, i.e., in Assessment Year 2011-12, WIP of ₹ 4,07,72,868/- was contributed by SPCL to the assessee firm. This was disputed by the Assessing Officer. Other than this WIP, the assessee had also acquired WIP from Sahara India Commercial Corporation Ltd. ( SICCL , for short), vide Memorandum of Understanding ( MoU , for short) dated 30.3.2011, in Assessment Year 2011-12, amounting to ₹ 46,84,19,842/-. Such acquisition had also been called into question, and was added by the Assessing Officer. The Assessing Officer thus made an aggregate addition of ₹ 50,91,92,351/- (₹ 4,07,72,868/- + ₹ 46,84,19,842/-) of WIP acquired by the assessee during Assessment Year 2011-12, under section 69C of the Act, which was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of SICCL and SPCL Lucknow for the A.Y. 2010-11 were also perused and the above-said WIP are found to be duly accounted for therein preceding their transfer to the assessee firm pursuant to the above-said MOU and the partnership deed. Thereafter the cumulative WIP amounting to ₹ 509,192,350/- appears in Schedule 3 forming part of inventory totaling ₹ 622,315,822/- appearing in the Balance Sheet of Sahara City Homes- Bareilly for the year ended 31st March, 2011 and not being routed through the related P L Account as closing stock since the firm was in operation for only 3 days during the F.Y. 2010-11 pursuant to execution of the partnership deed on 28.03.2011. Subsequently, the above said WIP of ₹ 509,192,350/- appears as part of opening inventories totaling ₹ 622,315,822/- in the P L account for the year ending 31st March 2012. Further, by way of a specific query letter dated 17.04.2017 (copy enclosed) the assessee firm was directed to furnish details of any construction/ development activities resulting in the said WIP, real estate projects carried on by it and relevant approvals, permits regarding change of land use, environmental clearances etc. rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the relevant ledger statements of SPCL Lucknow, who had incurred the said expenses, was perused and test checked with the relevant bills/vouchers. iii) The Third issue pertains to disallowance of capital expenditure of ₹ 912,631 appearing as addition to Fixed Assets. During the course of remand proceedings it was explained by the ARs that the same were incurred on purchase of light vehicle and electrical equipment during the financial year under consideration. The relevant purchase order, tax invoice, receipt and cheque payment detail, insurance receipt and copy of related ledger account were furnished by way of evidentiary details and examined and found to be in order. Accordingly, no adverse inference is being drawn in respect of this issue. The fourth issue relates to addition of ₹ 3,696,539/- under the head Customer Advances as being unexplained credit u/s. 68 of I.T. Act, 1961. The explanation furnished by the assessee along with relevant audited financial statements, TDS certificates in respect of payments made to customers and confirmatory statements of Sahara City Homes-Bareilly and SPCL Lucknow were examined. An amount of ₹ 4,215,716/- by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, bringing the assessee in further appeal before us. 20. Apropos Ground Nos.1 to 4, the ld. Counsel for the assessee has contended that the MoU dated 30.3.2011 (APB:36- 42) deals with transfer of WIP and related land and development rights; that the WIP was an existing asset, for which, the consideration had been fixed at ₹ 46,84,19,482/-; that the land and development rights were to be acquired by the transferor within a period of one year and the price thereof was to be determined mutually; that the valuation of the WIP was not mandatory; that in any case, no addition under section 69C of the Act was called for; that the consideration mentioned in the MoU tallies exactly with the assessee s financials; that the Ledger Account of the WIP (APB:43), as on 31.3.2011, also duly reflects the WIP acquired; that the details (APB:178-256) of the WIP were duly produced, beside other supporting evidence, before both the authorities below; that the Assessing Officers of the transferors, respectively, have accepted, in the concerned assessments, that the WIP was transferred; that the Assessing Officer had submitted his first Remand Report dated 08.05.2017 only after having du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of advances from customers did not pertain to the year under consideration. It has been specifically pointed out that the following are the details, forming part of the Paper Book filed before us, submitted by the assessee before the authorities below: a) Financial statements of SPCL and SICCL for F.Ys. 2010-11 and 2011-12 (APB 306, 391, 453 and 573). b) Assessment orders in the case of SPCL and SICCL for A.Ys. 2011-12 and 2012-13 (APB 381, 444, 487 and 602). c) Details of WIP with supporting evidences (APB 178-256). d) Confirmation certificate of SICCL and SPCL confirming transfer of WIP and advances from customers to the assessee (PBP 84 and 85). e) Break-up of WIP and advances from customers, confirmations, etc., vide letter dated 12.04.2017 (APB 99.) f) Details of land (APB 66-72). g) Reasons for putting development on hold, vide letter dated 12.04.2017 (APB 101). h) Approvals granted for projects developed by the assessee (PBP 106-145). i) Details of fixed assets (APB 146-162). j) Details of advances from the customers together with IDS Certificates (APB 163-177). k) Ledger Account of SPCL in the books of the assessee, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist any difference in the valuation and the consideration agreed upon mutually, the consideration was to be adjusted for the difference accordingly; that as per the MOU, the first party was to furnish to the second party, all the relevant papers and all necessary documents pertaining to the related land or development rights brought into the project on or before the acquisition of the land; that as per the MoU, the first party was to submit the entire record to the second party, and in case after perusal thereof, it appeared to the second party that there was some defect or discrepancy in the title pertaining to the land with regard to its marketability, it would have been the discretion of the second party to refuse to enter into the agreement to sell, and the decision of the second party in this regard would have been final and binding on the first party; and that as per the MoU, the definitive agreement and the final consideration payment was to be subject to valuation and due diligence and the parties had agreed that if any variance was found in the agreed consideration and the market value, then, either party would compensate the other party for the difference. 24. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directions issued by the ld. CIT(A) to the Assessing Officer to issue a notice for reopening the completed assessment for Assessment Year 2011 12, on a protective basis, to safeguard the interests of the Revenue, the ld. D.R. has contended that a notice under section 148 of the Act may be issued at any time for the purpose of making an assessment or reassessment in consequence of, or to give effect to, any finding or direction contained in an order passed in appeal; that however, it cannot be so done where the completed assessment relates to an assessment year in respect of which re-assessment could not have been made at the time when the order appealed against was made by reason of another provision limiting time for taking action for reassessment; that in the case at hand, the reassessment proceedings could have been initiated by issuance of a notice under section 148 of the Act, at the time when the assessment order for Assessment Year 2012 13 was passed by the Assessing Officer; that it was in consonance with this, that the impugned direction was, and correctly so, issued by the ld. CIT(A); that such direction was definitely required to be issued in order to protect th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clauses of the MoU are as follows: (1) That the First Party shall provide related land or development rights into the Said Project in the manner and mode as may be decided mutually by both the parties to this MOU. (2) That the First Party shall provide related land or development rights into the said Project to the Second Party within a period of one year from the date of signing this MOU (or Period mutually decided by both the Parties) subject to the due diligence and clear title of the said land. (3) That the First Party has agreed to provide free, clear and marketable title of the related land or development rights into the said project along with the WIP in favour of the Second Party as mentioned herein, within a period of one year from the date of execution of this MOU or such further period(s) as may be extended by the Second Party at its sole discretion. (4) That the Party of the First Part agrees to transfer the WIP of the said project immediately amounting to ₹ 46,84,19,482/- (Rupees Forty Six crore Eighty Four Lakh(s) Nineteen Thousand Four Hundred Eighty Two Only) and agreed to make available related land or development rights into the said Proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Current Liabilities and Provisions. 38. Likewise, the assessee submitted Ledger Account (APB:43) of WIP as on 31.3.2011. The WIP acquired by the assessee from SICCL and SPCL has been entered therein. 39. Then, the details of the WIP along with the evidences supporting the same (APB:178-256) were also furnished before both, the Assessing Officer and the ld. CIT(A). the Assessing Officer, in the first remand proceedings, examined (even as mentioned in the first Remand Report dated 08.05.2017) the audited financial statements of SICCL, SPCL and the assessee, for Assessment Years 2011-12 and 2012-13, the related Ledger Accounts in the books of all these three parties, the respective confirmatory statements of these parties, and the audited statements and Ledger Accounts of these parties, and the audited statements and Ledger Accounts of SICCL and SPCL, for Assessment Year 2010-11. The Assessing Officer found the WIPs to have been duly accounted for in the aforesaid voluminous documentary evidences, preceding the transfer of these WIPs to the assessee. The Assessing Officer has stated this in para (i) of his Remand Report dated 08.05.2017 [APB:259]. 40. The ld. CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at such a finding in the face of all the above discussed documentary evidence, without rebutting even a single piece thereof. This finding recorded by the ld. CIT(A) thus stands vitiated by the vice of a complete misreading and nonreading of material and voluminous documentary evidence brought on the record by the assessee. This finding is, hence, a wrong finding, unsustainable in the eye of the law, and we hold it to be so. As a consequence, the DR s alternative request of remitting the matter to the Assessing Officer for on-site verification and valuation, the role of the DVO being statedly crucial and no details having allegedly been filed by the assessee, is rejected. 44. The ld. CIT(A) has next observed that the Remand Report (dated 08.05.17) submitted by the A.O carries no force as the same has been prepared merely on the basis of the audited Balance Sheet and the Profit and Loss Account, and not on the basis of physical on-site examination of the work done. 45. First of all, a bare perusal of the Remand Report dated 08.05.2017 shows that the same has not been prepared merely on the basis of the audited Balance Sheet and the Profit and Loss Account, as erroneously obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out activities relating to site clearing, levelling, landfilling, removal of boulders, excavation and watering, etc., to consolidate the land holdings contributed by the transferors, etc. The Report states that the relevant approvals and permits, etc., from the concerned authorities, in respect of the projects under consideration, which are relevant approvals and permits, etc., and which were being enclosed with the Remand Report, for the perusal of the ld. CIT(A), had also been furnished by the assessee. The Report states that in the same reply, the assessee had informed that the transfer of WIP by SICCL to the assessee firm during Financial Year 2010 11 had been accepted during scrutiny assessment proceedings by SICCL s AO, viz., the DCIT, Circle 1, New Delhi, and that he had added notional profit on the said transfer, vide his order dated 20.11.14, passed under sections 143(3)/142(2A) of the Act, subsequent to special audit of the accounts of SICCL, under section 142(2A) of the Act. The Report states that likewise, as per the same Reply, the assessee had informed that no adverse finding, as regards the WIP transferred by SPCL to the assessee firm, had been given in its asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 was prepared merely on the basis of the audited Balance Sheet and the Profit and Loss Account, is ipso facto incorrect. 51. Apropos the ld. CIT(A) s observation that the Remand Report is not based on physical on-site examination of the work done, the voluminous documentary evidences filed by the assessee before the AO in support of the WIP, as discussed hereinabove, were furnished before the ld. CIT(A) too. We had, as stated hereinabove, requested the ld. D.R. to check from the ld. CIT(A) s record and confirm as to whether these documentary evidences were actually filed before the ld. CIT(A), which, on having seen such record, she has not been able to deny. The ld. CIT(A) has not made any adverse comments on even a single piece of all these evidences, meaning thereby, that he did not find anything which could have countered or rebutted or contradicted these evidences. They remained unshaken. And this being so, in order to decide the correctness or otherwise of the additions made under sections 69C and 68 of the Act, there arose no need of physical examination of the work done. It remained undisputed that the works-in-progress had been acquired by the assessee as they were and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the municipality, salary of the staff and security charges, etc., indubitably, getting the valuation of such WIP from the DVO is infeasible. It is well settled that nomenclature is not decisive of nature. Just because expenditure was debited to the WIP Account, it could not have been concluded that the WIP Account pertained to buildings under construction, or any other asset. It is not the Revenue s case that such debiting of expenditure to the WIP Account is not permissible. Moreover, the transfers of the works-in-progress stand accepted in the respective assessments framed in the cases of SICCL and SPCL, which fact, again, stands proved on record and remains unquestioned. As such, neither would physical examination of the work done help in adjudicating the issues, nor could the DVO carry out the valuation of the expenditure incurred on WIP. This also supports our rejection of the Department s request to remand the issue to the file of the Assessing Officer for valuation at the hands of the DVO. 52. Then, otherwise also, the requirements for making additions under sections 69C and 68 of the Act are specific and entirely peculiar thereto. They have no interplay with valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the assessee s activities relating to site clearing, levelling, land filling, removal of boulders, excavation, etc. These evidences were also furnished before the ld. CIT(A), who too did not find any fault therein. 58. The assessee also furnished before the authorities below, assessment orders in the cases of SPCL and SICCL, for Assessment Years 2011-12 and 2012-13 (APB:381, 444, 487 and 602). He intimated that the DCIT, Circle 1, New Delhi, i.e., the Assessing Officer of SICCL had, in scrutiny assessment, accepted the transfer of WIP by SICCL to the assessee during Financial Year 2010 11, and had added notional profit on the said transfer, by virtue of order dated 20.11.14, passed under sections 143 (3)/142 (2A) of the Act, subsequent to special audit of the accounts of SICCL. The assessee also stated that the DCIT, Central Circle 6, New Delhi, the Assessing Officer of SPCL, had, in his order dated 27.3.14, passed for Assessment Year 2011 12, not recorded any adverse finding concerning the WIP transferred by SPCL to the assessee. The AO, in his Remand Report dated 08.05.17, has taken due note of these assessment orders passed in the cases of SICCL and SPCL, by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crued interest of ₹ 2.41,955/~ and refunds to customers totaling ₹ 7,61,132/- the net customer advances of ₹ 36,96,539/- appear as closing balance under the head current Liabilities Provisions in Schedule 6 of the Balance Sheet of Sahara City Homes-Bareilly as on 31.03.2012. Further, the assessment order dated 27.03.2014 of M/s. Sahara Prime City Limited (enclosed with the reply dated 24.04.2017) for the A.Y 2011-12, relevant to the F.Y. 2010- 11 passed by DCIT, Central Circle 6, New Delhi docs not record any adverse findings in respect of the issue of customer advances as reflected in its balance sheet for the year ending 31.03.2011 subsequent to transfer to the various partnership firms including SCH - Bareilly in pursuance of the partnership deed dated 28.03.2011. Accordingly no adverse Inference is being drawn as regards the objection raised by the assessee. However, again as stated in para (iii) above, no examination of the customers as such has been possible at this ends, in view of their residing in another city and the resultant problems as stated in para (i) above. 65. He has also confirmed that no new advances had been received during the F.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same do not stand satisfied in the present case. The relevant portions of these sections are reproduced hereunder for the sake of ready reference: Cash credits 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Unexplained expenditure, etc. 69C, Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not:, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may he deemed to be the income of the assessee for such financial year (Emphasis supplied) 72. From the above, it is amply clear that the additions under sections 68 and 69C of the Act can be made provided the transaction takes place during the previous year / financial year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for reopening of the completed assessment. Such directions are entirely uncalled for and are required to be expunged. In this respect reliance has been placed on the following case laws: a. Mrs. R. H. Dave v CIT [140 ITR 1035 (Cal)] (ABP 640- 645). b. ITO v Murlidhar Bhagwan Das [52 ITR 335 (SC)] (ABP 646-666). c. N. Kt. Sivalingam Chettiar v CIT [66 ITR 586 (SC)] (ABP 667-671). d. Bakshish Singh v ITO [93 ITR 178 (Cal)] (ABP 721- 729). e. Order of the ITAT, Kolkata Bench, in the case of ITO v. Sri Biswajit Chatterjee in ITA no. 565/Kol/2013 dated 10.11.2017 (ABP 672-679). f. Order of the ITAT, Indore Bench, in the case of ACIT v. Shri Mukesh Sharma and others in ITA(SS) no, 88/Ind/2013 dated 04.06.2019 (ABP 680-712). g. Order of the ITAT, Delhi Bench, in the case of Shri Sanjay Thakur v. DCIT in ITA no. 3785/DeS/2015 dated 12.07.2018 (ABP 713-720). (II) The CIT(A), after confirming the addition in the year under consideration, cannot hold that the income has escaped assessment in the preceding assessment year. 78. It is contended that once the addition has been made as well as confirmed in A.Y. 2012-13, it cannot be said that the impugned additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to a categorical finding that the AAC had no jurisdiction to direct the ITO to bring the amount to tax in the correct assessment year, for, he could only decide the matter relating to the assessment year before him and not otherwise. This view of the Tribunal is corroborated by several decisions of the Supreme Court We may refer to the latest decision of the Supreme Court in the case of Rajinder Nath v. CIT , where the Supreme Court categorically observed that the expressions finding and direction , in Section 153(3) were limited in meaning. The Supreme Court observed that a finding given in an appeal, revision or reference, arising out of assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the assessee and in relation to the particular assessment year; to be a necessary finding, the Supreme Court observed, that it must be directly involved in the disposal of the case ; it was possible in certain cases that in order to render a finding in respect of A, a finding in respect of B might be called for; for instance where the facts showed that the income could belong to either A or B and to none else, a finding that it belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority hearing the case or appeal which, being necessary for the subject of the controversy between the interested parties, or on which the parties concerned have been given a hearing. 86. Similar is the view taken by the Kolkata Bench of the Tribunal in the case of ITO vs. Sri Biswajit Chatterjee (supra). 87. Rejecting the argument of the Revenue that the ld. CIT(A) ought to have given directions to reopen the case of the earlier year, the Tribunal referred to the power of the ld. CIT(A) under section 251 of the Act, and following the decision of the Hon'ble Supreme Court in the case of ITO vs. Murlidhar Bhagwan Das (supra), it categorically held that the ld. CIT(A) has no power under the provisions of the law for giving any direction to the Assessing Officer for reopening of the assessment. It was further held that the appeal before the ld. CIT(A) is confined to the particular assessment year which is before him. 88. The Indore Bench of the Tribunal, in the case of ACIT vs. Mukesh Sharma (supra), held that the ld. CIT(A) has powers to decide the appeal against the assessee, of a particular assessment, which he may confirm/reduce or enhance or annul. The order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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