2014 (12) TMI 216 - AT - Income Tax

Tribunal upholds CIT(A)'s PDC interest order, partially sustains Stamp Duty Act additions. Valid Section 153 proceedings.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order to recalculate interest on Post Dated Cheques (PDCs) and partly sustaining ... Interest on PDCs paid out of books of account deleted – Held that:- CIT(A) was rightly of the view that there is no evidence which proves that interest is paid from the date of sale to date of encashment of postdated cheques - where ever the date of PDCs are extended interest is paid @ 15% per annum in cash out of books of accounts which are evident from seized material - therefore, interest on PDCs to the extent of extension period appears to quite reasonable and logical - The ground raised by the Revenue is misconceived because CIT(A) has not deleted the addition but has only directed to recalculate the interest - after examining the loose papers seized at the time of search at the assessee’s premises, it was noticed that interest is paid on the PDCs only during the period of extension of PDCs – CIT(A) rightly directed the AO to re-compute the interest on PDCs at the time of extension of the PDCs - if it is not possible to work out the extension of PDCs in each case, then the AO is directed to recomputed interest on PDCs after six months from the date of issue of the PDCs – the order of the CIT(A) is upheld – Decided against revenue. Additional payment in violation of Stamp Duty Act, 1899 deleted u/s 37(1) – Held that:- When no expenditure is claimed by the assessee, the question of disallowing the same by the AO does not arise - the assessee was purchasing the land for and on behalf of another company of BPTP Group viz., M/s Countrywide Promoters Pvt. Ltd. and whatever payment is made by the assessee to land owners or their relatives for purchase of land was debited by the assessee to the account of CWPPL and the payment for purchase of land whether as per stamp duty or additional payment has not been claimed as an expenditure by the assessee - on this factual aspect, there is neither any finding by the CIT(A) nor by the AO – in Westland Developers Pvt. Ltd. Versus ACIT, Central Circle-23, New Delhi [2014 (12) TMI 254 - ITAT DELHI] - the principle is also accepted that when the expenditure is not claimed by the assessee, the same cannot be disallowed - However, the question still remains whether such payment i.e. additional payment made by the assessee to land owners or their relatives is claimed by the assessee as a deduction or not – thus, the matter is remitted back to the AO for verification and adjudication – Decided against revenue. Issues Involved:1. Deletion of addition on account of interest on Post Dated Cheques (PDCs).2. Deletion of addition on account of additional payment in violation of Stamp Duty Act, 1899.3. Validity of initiation of proceedings under Section 153 of the Income Tax Act.4. Seized documents proving interest payment on PDCs.5. General grounds.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Interest on PDCs:The primary issue raised by the Revenue was the deletion of an addition of Rs. 5,06,625/- made by the Assessing Officer (AO) on account of interest on PDCs paid out of books of account. During the assessment proceedings, the AO noticed that the assessee company, part of the BPTP Group, made part payments for land purchases with the balance paid through PDCs. The AO calculated interest at 15% per annum on these PDCs based on seized material, concluding that Rs. 5,06,625/- was unaccounted interest paid in cash. The CIT(A) directed a recalculation of the interest, noting that interest was paid only during the extension period of PDCs. The Tribunal upheld the CIT(A)'s order, finding no infirmity and noting that the CIT(A) did not delete the addition but directed a recalculation based on seized material. Thus, the Revenue's ground was rejected.2. Deletion of Addition on Account of Additional Payment in Violation of Stamp Duty Act, 1899:The second issue involved an addition of Rs. 1,01,32,501/- made by the AO under Section 37(1) of the Income Tax Act, 1961, for additional payments made by the assessee in violation of the Stamp Duty Act, 1899. The AO disallowed these payments, considering them unsupported by any legal right over the land and in violation of stamp duty regulations. The CIT(A) partly allowed the assessee's contention, permitting expenses made to landowners or their close relatives by account payee cheque but disallowing payments made to others or in cash. The Tribunal noted that the CIT(A) did not delete the entire addition but partly sustained it. It further directed the AO to verify whether the assessee claimed the payment as an expenditure. If no deduction was claimed, the disallowance would not arise. Thus, the Revenue's ground was rejected, and the assessee's related grounds were allowed for statistical purposes.3. Validity of Initiation of Proceedings under Section 153 of the Income Tax Act:The assessee contested the validity of the initiation of proceedings under Section 153 of the Act. However, no specific arguments were raised during the hearing, leading to the ground being treated as not pressed and subsequently rejected.4. Seized Documents Proving Interest Payment on PDCs:The assessee argued that the CIT(A)'s finding that seized documents proved interest payment on PDCs was based on surmises and conjectures without independent evidence. The Tribunal upheld the CIT(A)'s order, which directed the recomputation of interest on PDCs only if there was an extension of PDCs during the year or six months had elapsed since their issue. If no PDCs were issued during the year, no interest would be worked out. Thus, no further direction was required on this ground.5. General Grounds:Grounds 5 and 6 raised by the assessee were of a general nature and required no adjudication.Conclusion:The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes. The decision was pronounced in the open Court on 31st October, 2014.