IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "H" NEW DELHI
BEFORE SHRI H.S. SIDHU, JM AND
SHRI J.SUDHAKAR REDDY, A.M.
ITA no. 3483/Del/2012
And
ITA no. 412/Del/2011
Assessment Year : 2007-08
Webcity Builders and Developers P.Ltd. vs. ACIT, Circle 18(1)
1 E, Naaz Cinema Complex New Delhi
Jhandewalan Extension
New Delhi 110 055
PAN: AAACW 6305 R
&
ITA no. 816/Del/2011
Assessment Year : 2007-08
ACIT, Circle 18(1) vs. Webcity Builders and Developers P.Ltd.
New Delhi New Delhi
(Appellant) (Respondent)
Appellant by:- Shri Pradeep Dinodia, C.A.
Sh. RK Kapoor, C.A.
Respondent by:- Sh. J.P.Chandrakar, Sr.D.R.
ORDER
PER J.SUDHAKAR REDDY, AM
ITA 816/Del/2011 and ITA 412/Del/2011 are Cross Appeals directed
against the order of the Ld.CIT(A)-XXI, New Delhi dt. 26.11.2010 pertaining
to the Assessment Year (`A.Y.') AY 2007-08. ITA 3483/Del/12 is the appeal
filed by the assessee for the AY 2007-08 against the order of the Ld.CIT(A)-
XXI, New Delhi dt.26.4.2012.
ITA 3483/Del/12, AY : 2007-08
ITA 412/Del/11 AY: 2007-08
ITA 816/Del11, AY: 2007-08
Webcity Builders & Developers Pvt.Ltd.
2. The assessee is engaged in the business of Real Estate Development.
3. Revenue 's appeal : ITA 816/Del/2011:- Ground no.1 is against
deletion of disallowance of Rs.1,51,70,941/- by the Ld.CIT(A). The
disallowance was made u/s 40A(3) of the Income Tax Act, 1961. (the Act).
Ground no.2 is against deletion made by the First Appellate Authority on
account of deduction of purchase cost by the AO from that claimed by the
assessee.
4. The Revenue appeal is on the issue whether the AO was right in
charging notional interest.
5. We have heard Shri Pradeep Dinodia, along with Sh RK Kapoor, the
Ld.Counsel for the assessee and Shri J.P.Chandraker, Ld.SR.DR on behalf
of the Revenue.
6. We first take up the Revenue 's appeal.
7. On the first issue of S.40A(3) we find that the assessee has not
claimed any expenditure during the year. This is evident from the copy of
the profit and loss a/c at page 4 of the paper book. The purchases were
made in the earlier year. The AO passed an order u/s 143(3) of the Act on
24.12.2008 for the earlier AY 2006-07 and has accepted the purchases
made, without any disallowance. A copy of the assessment order is filed
before us. Under these circumstances, we have no other alternative but to
uphold the order of the First Appellate Authority on this issue.
2
ITA 3483/Del/12, AY : 2007-08
ITA 412/Del/11 AY: 2007-08
ITA 816/Del11, AY: 2007-08
Webcity Builders & Developers Pvt.Ltd.
8. The Ld.DR submitted that the assessee has not furnished particulars
of the purchases made, the mode of payment etc. The Ld.Counsel for the
assessee submitted that entire purchases were made in the earlier year and
the mode of payment was by way of crossed cheque. He also drew attention
of the Bench to page 5 of the assessment order to demonstrate that the total
cost of purchases of the land + the amount incurred for stamp duty
recorded in page 5 of the assessment order, is the opening stock for the
impugned AY. As the issue before us is the disallowance u/s 40A(3) of the
Act and as the assessee has not claimed any expenditure during the year,
the question of upholding disallowance u/s 40A(3) of the Act does not arise.
The other matters raised by the Ld.D.R. did not emanate from the record. In
the result this ground of Revenue is dismissed.
9. Coming to ground no.2, the First Appellate Authority at para 6.8 has
held as follows:
"I have considered the submissions of the assessee and findings of the AO in
the assessment order. Regarding the computation of loss on sale of land, it is
seen from the submissions made by the assessee and also from the
observations of the AO that the purchase price of land, subject matter of sale,
was Rs.1,88,53,629/-. The AO has disregarded a sum of Rs.19,32,269/-
from the purchase price which represent the amount payable to the
consolidator. There is no doubt that the assessee paid full price i.e.
Rs.1,88,53,629/- on purchase of impugned land which has been paid to the
land owners or to the consolidator. The AO is not justified in reducing the cost
of acquisition and hence making an addition to the profit on sale of land.
3
ITA 3483/Del/12, AY : 2007-08
ITA 412/Del/11 AY: 2007-08
ITA 816/Del11, AY: 2007-08
Webcity Builders & Developers Pvt.Ltd.
Nothing has been brought on record that the purchase and sale are not
genuine. In view of these facts, the assessee is entitled to a relief of
Rs.19,32,269/-."
9.1. The amount paid by the assessee is Rs.1,88,53,629/-. The AO has
adopted a cost of Rs.1,69,21,360/-. The reason given by the AO for such
deduction is vague and devoid of merit. Thus we uphold the finding of the
First Appellate Authority and dismiss this ground of Revenue.
10. In the result ITA 816/Del/11 is dismissed.
11. Now we take up assessee's appeal.
12. After hearing rival contentions, we are of the considered opinion that
notional interest cannot be charged as there is no such provision in the Act.
At best the AO would have disallowed interest claimed by the assessee. The
Ld.Counsel for the assessee pointed out that no expenditure on account of
interest has been claimed during the year. Under the circumstances the
additional of notional interest is hereby deleted. While doing so we draw
strength from the decision of Hon'ble Gauhathi High Court in the case of
High Way Construction Co.Pvt.Ltd. vs. CIT (1993) reported in 199 ITR 702,
wherein it was held as follows.
"...If the assessee had not bargained for interest, or had not collected interest,
we fail to see how the income-tax authorities can fix a notional interest as
due, or collected by the assessee. Our attention has not been invited to any
provision of the Income-tax Act empowering the income-tax authorities to
include in the income interest which was not due or not collected". In the
instant case, the addition was made by the AO on notional interest which was
4
ITA 3483/Del/12, AY : 2007-08
ITA 412/Del/11 AY: 2007-08
ITA 816/Del11, AY: 2007-08
Webcity Builders & Developers Pvt.Ltd.
not in the existence. So, the first appellate authority as well as the Tribunal
have rightly deleted. In the light of above discussion and by considering the
totality of the facts and circumstances of the case, we find no reason to
interfere with impugned orders passed by the Tribunal. The same are hereby
sustained along with reasons mentioned therein. The answer to the
substantial questions of law are in favour of the assessee and against the
department.
12.1. Respectfully following the same we allow this ground of the assessee.
In the result this appeal no. ITA 3483/Del/2012 is allowed.
13. The Revenue's appeal directed against the order of the Ld.CIT(A)-XXI,
New Delhi dt. 26.4.2012, wherein he has confirmed the penalty levied by the
AO u/s 271(1)(c ) of the Act on the addition of Rs.30,35,000/- made on
account of notional interest. We have deleted the said addition while
disposing of the quantum appeal in ITA 3483/Del/12. In view of the same
we allow this appeal of the assessee i.e. ITA 412/Del/2011.
Order pronounced in the Open Court on 01st June, 2015.
Sd/- Sd/-
(H.S. SIDHU) (J.SUDHAKAR REDDY)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: the 01st June, 2015
*manga
5
ITA 3483/Del/12, AY : 2007-08
ITA 412/Del/11 AY: 2007-08
ITA 816/Del11, AY: 2007-08
Webcity Builders & Developers Pvt.Ltd.
Copy of the Order forwarded to:
1.Appellant;
2.Respondent;
3.CIT;
4.CIT(A);
5.DR;
6.Guard File
By Order
Asst. Registrar
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