TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1049
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....e the learned CIT(A) erred in sustaining the addition of Rs. 1,60,18,918/- u/s 40(b) of the Income Tax Act, 1961 on account of interest payment to partners without considering the reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern. 2. Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 10,72,932/- u/s 43CA of the Income Tax Act, 1961 without considering the reply of the assessee and without referring to the DVO. (3) Under the facts and circumstances of the case the learned CIT(A) erred in sustaining the addition of Rs. 1,18,807/- u/s 37 of the Income Tax Act 1961 by disallowing various expenditure on account of interest payment on statutory liabilities. 4. Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 3,25,000/- on account of VAT composition provision. 5. Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 3,33,358/- on account of foreign travelling expenses. 6. The assessee craves your indulgence to add amend or alter al....
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.... Rs. 5,16,95,795/- as appearing in Schedule-20 of the above accounts. In other words, while claiming the expenditure, the appellant has considered full amount of interest payment to the partners at Rs. 5,16,95,795/- without giving any consideration on account of excess interest payment. Had the working of interest at 12% rate been considered, then the above figure would have been Rs. 3,56,76,877/-in profit and loss account. of Rs. 5,16,95,795/-. Thus, excess interest has been claimed in (xiv) The appellant's contention that the excess interest has been considered while working out the stock is also examined. It is seen that in the profit and loss account, the difference in stock in trade has been taken at Rs. 11,30,27,413/- as per Schedule-18 of the accounts. In the Schedule-18, the closing stock has been taken at Rs. 42,41,06,440/-. The above figure is coming from the working of closing stock computed as per percentage completion method. In the above working, the total cost of the project has been taken at Rs. 83,80,44,851/- which is coming from total cost incurred upto 31.03.2016. In the above working, the total cost incurred was worked out at Rs. 85,40,63,769/- which was f....
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....fair market value of the property. However, in the case of the appellant, no such claim was made before the AO. The provision of section 43CA of the Act specifically deals with the situation where in calculating profit from business on account of sale of land/building, the value adopted by the stamp valuation authority is considered as full value of sale consideration. In the case of the appellant, the value adopted by the stamp valuation authority was Rs. 91,11,432/-, while the appellant has taken value at Rs. 80,38,500/- in its computation of income. Thus, the AO was justified in making addition of Rs. 10,72,932/- as per provisions of section 43CA of the Act. Hence, the addition made by the AO is upheld and the ground is dismissed." 6. During the course of hearing the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below in respect of the above ground taken by assessee: "The assessee is a LLP and is engaged in the business of real estate. Return of income for the year under consideration declaring total income of Rs. 56,68,460/- was filed on 29.09.2016. The Learned Assessing Officer completed the assessment u/s 143(3) of the....
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....2583 909375 Total 3639041 48056754 51695795 Calculation Sheet of Interest in respect of each partner on day to day bases is available on paper book page number cited supra. (iv) During the course of assessment proceedings the learned assessing officer noticed that claim of interest in excess of 12% was not allowable with reference to the provisions of section 40(b) of the Income Tax Act, 1961 and hence interest amounting to Rs. 2,73,79,564/- has been disallowed out of total claim of interest of Rs. 5,16,95,795/-. (v) It is submitted that the addition made by the learned Assessing Officer on account of disallowance of interest is unlawful and unjust. The learned Assessing Officer has made the addition as he failed to appreciate the facts of the case in proper perspective. During the course of assessment proceeding the assessee made a detailed submission under letters dated 01.11.2018. Copy of this letter is available on paper book page no. 54 to 55. (vi) It is submitted that the books of accounts of the assessee are audited u/s 44AB. A copy of audited accounts and report in from no. 3CD are available paper book page cited supra. In the audit report the auditors have....
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....- (correctly works out to Rs. 1,60,18,918/-. (ix) It is further submitted the interest in excess of @12% on current account comes to Rs. 16,018,918/- and the assesse has reduced the cost of construction by this amount. This means reducing of the value of stock to same extent. It directly results in profits in the hand of the assesse to the same extent and there is no loss to the revenue by adopting of this method by the assessee. The action of the leaned Assessing Officer in making addition of Rs. 2,73,79,654/- by disallowing interest in excess of 12% has resulted in double addition because the assessee had already had carried the fact of disallowance by way of reducing the cost of construction. (x) It is further submitted for the purposes of clarification that interest has been paid to partners @18% on current account so that the balances in the hands of the partners remain positive and reflect a sound financial position as against negative figures which affect the financial position of partners in business circle particularly before banks. In any case the action of the assesse has not resulted in any loss to the revenue. Therefore, the addition made by the learned Assessing O....
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....iples of natural justice are applicable to assessment proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material which is going to be used against him so that he may be able to meet it - (ii) Tin Box Co. v. CIT [2001] 116 Taxman 491 (SC). When opportunity of hearing was not properly given - Where the Tribunal had recorded that it agreed with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard, the Tribunal would not be justified in not setting aside the assessment order and remanding the matter to the assessing authority for fresh consideration after giving opportunity of hearing to the assessee. (iii) Dwijendra Kumar Bhattacharjee V Superintendent of Taxes (1990) 78 STC 393 (Gau.) Opportunity must be real and effective : The opportunity given to the assessee to be heard must be real and reasonable. If an assessee, who is asked to furnish certain particular or submit explanations within a specified time, prays for further time stating his difficulties and/or reasons, his prayer should be considered judiciously. Sometimes, proceedings for assessment for a number of yea....
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....ansfer of such asset, be deemed to be the full value of the consideration.] (2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1). (3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement. (4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or a part thereof has been received 57[by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account] on or before the date of agreement for transfer of the asset. SECTION 50C 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assess....
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....th necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1.-For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2.-For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. The provisions of section 43CA require that before adopting the value of property as determined by....
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....nting the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. (ii) CHANDRA NARAIN CHAUDHRI VS CIT (2014) 99 DTR (ALL) 0105 It is mandatory on the part of the AO to make reference to Valuation Officer as per provisions of section 50C where the assessee contended that valuation as done by Stamp Valuation Authority is not acceptable to him. The decision of the AO was not correct where he held that reference to Valuation Officer is optional since the assessee had not objected to value adopted by the State Valuation Authority, there was no need to refer matter to the Valuation Officer [ Kalpataru Industries Vs. ITO ITAT No. 5540/Mum/07 decided on 24.08.2009. (iii) Raj Kumar Agarwal vs. DCIT (2014) 150 ITD 597 (ITAT Agra) Once the assessee claimed that the actual market value of the property is less then the stamp duty valuation, it was incumbent upon the Learned Assessing Officer to refer the matter of valuation to the valuation cell. 2. Value taken by stamp/Registration Authorities n....
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.... this regard we would like to submit that during the assessment proceedings the Learned AO has not provided any opportunity to the assessee or issued any show cause notice prior to the making of addition on this account. The Learned AO has collected and gathered the information from the data and details submitted by the assessee and state away made the addition without providing any opportunity or giving any show cause notice, which is gross violation of principal of natural justice. Therefore relying on the judgement of Sunil Kumar Agarwal Vs CIT(2014) 112DTR164(CAL.) The whole addition deserve to be deleted. Ground 3- Under the facts and circumstances of the case the learned CIT(A) erred in sustaining the addition of Rs. 1,18,807/- u/s 37 of the Income Tax Act 1961 by disallowing various expenditure on account of interest payment on statutory liabilities. Not Pressed Ground 4- Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 3,25,000/- on account of VAT composition provision. Not Pressed Ground 5- Under the facts and circumstances of the case the learned CIT(A) erred in confirming the addition of Rs. 3,33,358....
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....e on this ground and he has heavily relied upon the orders of the lower authorities on this issue too. 8. We have heard the rival contentions, perused the material available on record and case laws cited by both the parties. It is not disputed that the assessee is regularly assessed to tax and the method of capitalizing interest in the cost of construction is not even not disputed in the earlier years. The assessee has supported his contention by filling the detailed calculation showing that excess claim is considered while computing the stock valuation and the same is confirmed by the ld. CIT(A). This fact is also confirmed by the ld. CIT(A) and we have extracted the findings of the ld. CIT(A) in para 5.1 above, where in at three places the ld. CIT(A) has confirmed that the assessee has given the treatment of the excess interest in the closing stock. The relevant finding of the ld. CIT(A) is at page 22 to 24 in para (xii) to (xv). The said findings of the ld. CIT(A) have not been challenged by the department by filling a separate cross objection and even in the hearing the ld. DR has not pin pointed the said treatment explained in the working filed in the paper book by the assess....
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....he Annexure C (Page 47 & 48 of assessee paper book ) of the Tax Audit report annexure carried out as per provision of section 44AB of the act, where in the tax auditor has also confirmed this treatment that the excess interest claim has been corresponding reduction in cost of construction. This has not been challenged or discussed by the lower authorities. Merely the said adjustment not done in the profit & loss account the double disallowance cannot be made. Even the ld. CIT(A) has also confirmed that in the computation of income the same is disallowed and allowed giving it the effect as Nil. In terms of these observations the ground no. 1 raised by the assessee is allowed. 9. As regards the ground no. 2 where in the assessee agitated the addition of Rs. 10,72,932/- u/s. 43CA of the Act. The ld. AR of the assessee stated that lower authorities not granted an opportunity and not considered the contentions of the assessee not only that the matter was not sent to DVO for the alleged difference in valuation of the property. 9.1 In this regard we have persuaded the order of the lower authorities where in it was stated that the assessee was given an opportunity to substantiate the dif....
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....eferred to such authority for the purposes of the payment of stamp duty. Thus, it is clear from the above provision of the law that the assessee has to claim that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. In the present case the ld. AR of the assessee not placed any evidence that the claim was placed before the ld. AO. All the decision relied upon are applicable where the assessee make a claim and not considered by the lower authority and in that the case the courts have held that the addition made without giving an opportunity to the assessee is not sustainable whereas in this case the assessee has chosen to remain silent on the issue. The relevant finding of the ld. CIT(A) is extracted in the matter to under the correct facts before the lower authorities: "(ii) During the appellate proceedings, it was contended that the AO has not provided the sufficient opportunity to the appellant to offer its explanation. It was also submitted that the AO was required to refer the matter to DVO as per provisions of section 50C(2) of the Act. (iii) I have duly considered the submiss....